The USD/CAD pair fell during the Monday session, but found plenty of support at the 0.9950 level in order to bounce and form a hammer or the daily candle. This hammer suggests that we are going to go back to the 1.0050 level, and that we are simply consolidating above the recent breakout point at 0.9950.
Interestingly enough, the Canadian dollar is losing ground against the US dollar while the oil markets looked fairly strong. Because of this, this is a sign that there is something wrong with the Canadian dollar itself, and this could be in reaction to the fact that the central bank in Canada recently stated that rates will have to remain lower longer than previously expected. This of course decreased demand for the Canadian dollar, and you see the results on the chart.
The 1.0050 level has been rather interesting over the long run, as it seems to be an area where the sellers stepped back into the marketplace. However, the most recent move towards that area actually broke higher, and surprised us when it pullback as far as it did. Now that we have done this pullback though, it has to be said that this does look like a pair that’s trying to breakout to the upside.
Going forward, we believe that this market will be very erratic, which is fairly common for this pair. This area between here and 1.0050 does look a bit crowded though, so we expect any move higher will certainly be choppy at best. Is because of this that a lot of traders will simply overlook this pair going forward, which could be very costly as this market does tend move very suddenly when it finally makes up its mind.
Going forward, we do expect bullishness in the US dollar over the Canadian dollar, simply because the Canadian dollar itself isn’t acting quite correctly. Nonetheless, if we managed to break the hammer blows from the Monday session, we believe that the market would then dip trying to find the 0.984 level support.
Written by FX Empire