The USD/CAD pair had a very strong showing on Friday, as the United States Dollar continues to out power all other currencies on the whole. Look in this market, the 1.03 level was a resistance area that I have marked out on the chart previously, and as you can see that exactly where we stopped for the session. However, this candle does look very strong, and the Canadian economic numbers are starting to slow down at the same time. Because of this, I do believe that we will eventually breakout to the upside in this market.
In order to consider this market completely broken out, I would need to see a move above the 1.0350 level in order to leapfrog the last remnants of resistance. If we get that move, we will almost immediately test the 1.04 handle, which is the next resistance area that I see. Beyond there, I don't see any significant resistance on the longer-term charts until we get the 1.10 handle.
Although that seems like a very strong move, the truth is that this pair tends to move like that. We go sideways for quite a while, and then all of a sudden we go parabolic or falloff of the cliff. This is because the two economies are so intertwined, that it's very rare that they get that out of balance.
Watch the oil markets
The traditional correlation is that a higher price in the oil markets means that this pair falls as the Canadian dollar gains. However, we have seen the Dollar and the oil markets rise in the same time recently. This to me suggests that there is extreme strength in the US dollar, and that if we do get a selloff in the oil markets that really could propel this pair much higher. After all, it's essentially fighting its normal correlations and still looking this strong.
The question then becomes whether or not we can keep this momentum up. If we get a pullback, I would not be surprised at all to see the 1.02 level offer enough support for the buyers to step back in and try to live prices again.
