By: Christopher Lewis

USD/CAD continued to grind away during the Thursday session as the oil markets go back and forth. Also, with a European Union that seems to only be touching on the edges of a deal, although the “risk on” attitude has been dominant, it hasn’t necessarily been prominent.

The pair will continue to react to oil markets, and in turn to the issues with Iran. Currently, the markets are starting to write off the probability of an Iranian blockage of the Strait of Hormuz, and this is probably going to be the case in reality as well. Simultaneously, the Federal Reserve is currently keeping rates ultra low until the end of 2014, so this makes the slightly higher rates coming out of Ottawa much more enticing than they would normally be.

The recent action has been enough to put anyone to sleep quite frankly, but this is how the pair acts. It likes to grind and do very little, occasionally interrupted by massive moves. I feel that we are seeing another “calm before the storm” situation. The pair has been hovering above the currently levels for some time, even though there has been a downward bias.

Support Below

I see support going all the way down to the 0.9750 level in this pair. So while we did manage to get below parity and stay there, I see 0.99 as being a problem for the sellers, as well as the 0.98 and 0.9750 levels. The bottom of this area is when we will finally be free to sell this pair as we will have overcome the major obstacles.

A daily close above the 1.01 level would show real strength, and it is what I am looking for in order to buy this pair. The recent candlestick action suggests that we are going to consolidate for a while, and this area looks to be a good spot. However, there are headlines risks out there, most of which could favor a “risk off” situation – and this normally means pro-Dollar. With this in mind, I am waiting for a larger candle in one direction or the other, but actually feel a bit more comfortable on the long side if we are above 1.01, and if I were to short a breakout of the last three days range – I would be cognizant of the fact that it is going to be a grind lower – not a run.