The USD/CAD pair fell on the session for Monday and the action was very weak. This pair has recently broken out to the upside recently, and the 1.01 level now should be supportive all the way down to the parity area. The oil markets have been getting beat up lately, and this of course weighs upon the Canadian dollar.
The recent move in this market has been a bit strong, and it only makes sense that the pair would pullback. As the oil markets fell down below the $92 level on Friday and then bounced on Monday, it makes sense that the USD/CAD pair would behave the way it did. The Loonie is going to be heavily influenced by the oil markets, and the commodity certainly looks vulnerable on the longer term charts. With this in mind, we are still bearish overall on the oil markets as well as the Canadian dollar as risk will come off from time to time.
The markets did well overall on Monday, and this was all part of a bounce for risk assets in general. The bearish behavior of the markets for May has been strong, and we don’t think that the negativity is anywhere near being done. This sets up nicely for a buy in this pair if that thesis proves to be true. We think that the 1.01 level will be supportive as many of the traders that missed the breakout will want to participate, especially if there is bad economic news to accompany it.
The selling of this pair is almost impossible, and certainly so until we close below the parity level. The breaking of this area would have us selling aggressively as the previous consolidation range between parity and 0.98 should be the market for a while if this happens. The nicely defined area would have us taking profits at the 0.98 area on those short positions, and looking to sell bounces. However, in the meantime we are still focused on the prospect of a higher USD/CAD pair as the commodity markets still seem a bit disliked at the moment.
Written by FX Empire