The USD/CAD pair broke higher during the course of the session on Friday, testing the 1.30 level. This being the case, the market looks as if it is ready to make a significant move, and if we can get a move well above the 1.30 handle, we feel that the market can go much higher. After all, this is exactly where the financial markets stopped after the meltdown. Years ago, we sell this market offer a massive amount of selling pressure in this area, so it may take several pullbacks in order to build up the momentum to go higher. However, once we get that move we would be buyers of this pair and would fully anticipate seen this market grind its way much higher. This would be a longer-term buy-and-hold type of situation, as the market should then go to much loftier levels.
You will have to watch the oil markets, but if they break down from here, that could be enough to send the Canadian dollar into a spiral downwards. The Bank of Canada had an interest-rate cut during the previous week that was a bit of a surprise, pushing this market above the 1.28 handle. This was an area that offered a significant amount resistance, and we are now towards the top of the “zone” of resistance that has been so brutal to the US dollar in the past. We believe that this market could find itself going much higher given enough time, but at this point in time it’s difficult to imagine that it’s going to be an easy move.
Once we get the daily close above the 1.30 level, we believe that every time this market dips, it is going to offer value in the US dollar. This could be a multi-year trend that’s about ready to start. We have no interest in selling, at least not until we get below the 1.2650 level, and anything between here and there on a supportive candle should be a bit of a momentum building exercise we can take advantage of and start buying.