The USD/CAD pair rose during the session on Thursday, bouncing off of the 1.0850 level. This area of course is trying to offer some type of support for a market that has broken down significantly. A break of the 1.09 level offered enough bearish momentum to push the market down and make us think that is going to start selling off. The fact that we got a little bit of a bounce for the session on Thursday is no real reprieve, and as a result we believe that the market should continue to offer selling opportunities sooner or later. We also believe that the 1.10 level might offer a resistant candle as well, so that might be an area to look.
If we get a move above the 1.10 level, at that point time we would assume that the market is going to consider the downtrend for the last couple of weeks broken, and that we would resume the bullish attitude that we’ve seen for so long. However, we don’t think that’s going to happen in the short-term. With that, we feel that the market will more than likely drift down to roughly 1.07 or so, and then find real buying pressure down there. A supportive candle in that general vicinity would be enough to get us to start buying again, as it should show the market is ready to continue going higher. There is a lot of support down there as far as we can tell, so certainly is a much longer term trade if we get that signal.
We believe that this move is probably a little bit overdone, but do recognize that there isn’t a whole lot technically on the chart that suggests there is a ton of support to be had quite yet. With that, we believe that the buyers will eventually be brought back into the fold, purchasing the US dollar which of course has done fairly well over the last several months. Watch the oil markets as well, they will certainly influence the Canadian dollar over the longer-term.