The USD/CAD pair initially fell during the course of the session on Tuesday, testing the 1.30 level for support. That level was massive resistive previously, so it should now be supportive. This was the long-term resistance barrier that the markets could not break above after the financial crisis. Because of this, it should now be massively supportive, so we believe that the market should continue to grind its way higher. The candle is a hammer for the session, just like the one that we saw formed for the Monday session. Ultimately, we believe that this market continues to go higher as the US dollar is going to be favored over most currencies around the world anyway.
On top of all of that, we believe that there is massive support between the 1.30 level and the 1.28 level below there. It’s essentially a “zone” of support. The oil markets of course are not working in favor of the Canadian dollar right now as they sold off rather drastically during the session on Tuesday. Ultimately, the market should continue to attract buyers from time to time, and as a result we look at pullbacks as potential value in the greenback.
With that being said, we do recognize that this pair is probably going to be volatile, as it does typically spend long periods of time grinding sideways. With fact, patience will be needed in order to go forward in this market, but we do believe that once the liquidity comes back into the marketplace after holiday season, this market should continue to go much higher. We have no interest in selling until we break down below the red line on the chart, which is the 1.28 handle. We would need to see at least a daily close below the level if not a weekly close. We believe at that point in time the trend will probably change and the downside will be the way to go going forward. However, we would not follow that move and less the oil markets also rallied at the same time. Ultimately though, we do think that the upside is the right way to go.