USD/CAD Forecast April 23, 2012, Technical Analysis

The USD/CAD pair fell for the session on Friday as the “risk on” trade came back and the US dollar fell in general against most of the world’s currencies. The recent action suggests that there is perhaps more danger of falling than rising overall, but the range has been vigorously defended by both the bulls and bears as the consolidation has been so clear cut over the last three months.

This isn’t exactly an uncommon phenomenon in this pair as it like to move sideways for long stretches of time, only to suddenly move in one direction with vigor. The parity level starts the resistance, and it isn’t until we get above the 1.01 level that we feel this pair is broken  out to the upside. The breaking below of the 0.98 level on the daily chart has us thinking that the pair is about to take another leg down.

The 200 day EMA is just above parity, and this will be important as well. In fact, this is one of the reasons that we feel the real threat is to the downside, as well as the massive red candle on Tuesday. The parity level will be difficult to break, and if we could manage to break above the 200 day EMA, it would be a massively bullish signal.

The oil markets will be a massive influence on this pair, as well as the interest rate expectations of the United States. The Federal Reserve has the “FMOC Meeting” this coming week, and any decision to mention QE3 or not will play a major factor in the future of this pair. If we see a mention of possible easing, this will drive commodities higher, and this will in turn push this pair lower.

The market can be played form a short-term stance as well, as selling at the parity level has been so successful recently. Also, the 0.9850 level looks very supportive as well, and has been just as reliable. With this in mind, we are trading this pair form a scalper’s point of view, at least until one of those levels give way.

Written by FX Empire