The US dollar rallied against the Canadian dollar initially during the session on Monday, reaching towards the 1.2525 handle. We did pullback a little bit later in the day though, as we continue to see quite a bit of noise in this market. We are currently testing a recent break down through the bottom of an uptrend line, and that should continue to be fuel to the fire when it comes to the noise in this market. I believe that we can close on a daily chart above the 1.25 level substantially, then we continue to go towards the 1.2750 level, and then eventually the 1.30 level. Obviously, crude oil markets have an effect on this pair as well, so keep that in mind. The higher crude oil goes, typically the lower this pair goes. Because of that, we could have a sudden reversal.
If we were to break down below the 1.24 level, I think the market probably goes down to the 1.23 level next, and then eventually the 1.21 level after that. I suspect that the 1.20 level would be a nice psychological target, but once we break down from here, we will have not only broken below an uptrend line, but retested it for resistance, confirming that. That would be a massive cell signal. Buying on the other hand would be a bit difficult, as it will be more of a “climbing the wall of worry” type of trade that stock markets tend to offer. Either way, this pair will be volatile, so by all means I would keep my position size small until you started to get the momentum moving in your favor. Once that’s the case, then obviously you can add to either trade that pans out, as we are at a major inflection point.
Written by FX Empire