The USD/CAD pair originally rose during the Friday session as the market peeked over the parity level. However, the later hours of the day saw the pair fall back below the parity level, and as a result we saw a shooting star form right at this level, and this is exactly where we find massive resistance as well.
The candle makes sense as the oil markets look set to move higher, so a move into the Canadian dollar will more than likely be seen. In this market, it is important to watch the oil prices as they have a massive effect on price of the Canadian dollar. The bottom of the shooting star that formed on Friday will be the spot in which we want to short this pair from.
The move isn’t necessarily somethi8ng that we expect to see some kind of meltdown from; rather we think that the move could see a drop to the 0.9850 area as it is the bottom of the recent consolidation. The 200 day moving average (EMA) is just above price at the moment, so trend traders will be shorting from this level as well. The fact that these several issues are lining up at the same time suddenly has our interest as this pair has been too choppy to trade lately. It looks as if we could possibly see a real move soon in this pair.
Of course, if the 1.01 level above gets broken to the upside, it is going to be a massively bullish sign. If this happens, we will have to go long at that point, and it is likely to happen if there is some kind of negative shock to risk as the Dollar will then be the “safe haven” trade. Unless that happens though, it is very likely that we will see a drop in this market. We are only suggesting a short-term trade, and don’t necessarily think that we are going to fall in massive amounts as this pair simply has far too many support levels below that have had effects on the market lately.
Written by FX Empire