USD/CAD fell for the Tuesday session as the oil markets continued to grind higher. However, much like the oil markets, this pair has found itself winding up in a tighter and tighter manner as it has formed a daily triangle. The triangle is symmetrical, which of course shows real indecision. The oil markets are certainly to blame for this, and as a result this pair has to be traded while following the oil markets as well.
On a daily close outside of the triangle, we are willing to take a trade. The 1.01 level below is the start of a massive support area, and as a result, we feel longs are probably more likely to do well over shorts going forward. However, you cannot buy at this point – you need some kind of proof. The daily candle is a hammer, and this shows support as well. Because of this, we think it goes higher, and would be willing to take a short-term small position to reach the top of the triangle. However, no larger positions can be taken until we are out of the pattern.
Written by FX Empire