The USD/CAD pair has been one that we have been watching for several sessions, and the biggest problem we had was the fact that the “parity” level was not only resistive, but 100 pips thick. The 1.01 level was the level we have been waiting for to give way, and it finally did on Wednesday. With this being the case, we see a break of the highs from the Wednesday session as a signal to go long in this pair.
The oil markets are absolutely falling apart, so a move higher in this market makes absolutely perfect sense. The 200 day exponential moving average is well below us, and the last couple of sessions both look very healthy. As the $95 level gave way in the Light Sweet Crude markets we had taken notice. Now that the currency level has been broken as well, we like going long at this point.
The next couple of hundred pips will be tough, and the move could be a bit choppy, but the sentiment has certainly shifted in this market. The 1.03 level should be resistive as well, and it will be at that point that we will have to take a look at the market as a whole to decide how long we wish to hold onto the trade.
We would bail out of any longs if the market gets below the parity level at this point as it would show a breakdown in momentum. The move would also suggest that the pair was going back into consolidation from the past couple of months, and this would be an easy short. Until then though, we have to take the pair at its face value and understand that the Dollar is currently the most favored currency in the markets.
The oil market will continue to give us a “heads up” on this pair, and we think that the Light Sweet Crude market is very weak looking. Again, if we get a break of the highs from the Wednesday session, this would signal continued bullish momentum that we couldn’t ignore.
Written by FX Empire