The USD CAD pair tried to rally during the session on Friday, but as you can see failed to hang onto the gains. Because of this, we ended up forming a shooting star as the 1.12 level turned out to be far too resistive. This resistance of course caused the market to suddenly look a bit on the weak side. However we recognize that the larger move has been extremely positive, and that the 1.10 level appears to be rather supportive. The candle from Wednesday was so strong that we have a hard time believing that this market can fall for any great length of time. Quite frankly believe that any pullback from this area will only invite more buying, but also recognize the fact that the 1.12 level will be a bit difficult to get beyond.
The other scenario of course is that we break above the top of the shooting star, which would have this market looking rather strong as it would not only break the top of the shooting star, showing a break of resistance, but also a break of the 1.12 level which of course is resistive in its own right.
We believe going forward that the USD/CAD pair should target the 1.15 level, but this will take time. It is not until we get there that we see massive resistance, which of course will be some time down the road. We also believe that the support down at the 1.10 level extends all the way down to the 1.0850 level, so any pullback here should have absolutely no trouble finding buyers. With that, we feel that the buyers will control this market over the longer term, and anytime that we pullback it should be thought of as potential “value”, and not any attempt to beat down the market.
The truly interesting thing about this market is that the Canadian dollar continues to selloff, while the oil markets look very strong. This is normally not the case, and as a result it shows just how strong the US dollar is against the Loonie as even that well markets can’t protect it.