The USD/CAD pair fell during the bulk of the session on Friday, but as you can see found enough buyers during the day to turn things back around and form a nice-looking hammer. The hammer sits just below the 1.10 level, an area that has been rather important several times before. We feel that a break above the 1.10 level since this market back into an uptrend and looking for the 1.12 handle. Above there, we could go as high as 1.15 handle which is ultimately our longer-term target.
Another thing that has us interested in this market is the fact that there is a significant amount of noise between here and the 1.0850 level, and the fact that the hammer had formed just on top of that cluster of course lends more credence to that general vicinity. That vicinity is where we broke out from previously, and the fact that we’re back here retesting it really isn’t that big of a surprise.
We do recognize the fact that this market will probably be somewhat choppy on the way up, but ultimately it is in an uptrend over the last couple of months. The pullback hasn’t been all that extreme, and if you look at it, the fall has been rather orderly. It’s been more of a gradual drop or drift and less of a significant fall. In fact, if you look at the numbers, we have fallen 200 pips after initially rising 600.
We believe that ultimately the longer-term action for this market is bullish, but recognize the fact that the USD/CAD pair tends to chop around quite a bit and grind. It tends to grind sideways in rectangles, and then make an impulsive move in one direction or the other. It is because of this general action that you typically have to stay in this market through a lot of volatility in order to catch the decent move. Those who understand that can do quite well this market as they learn to ignore the short-term fluctuations that are so prevalent between two economies are so highly interconnected.