The USD/CAD pair recently broke out above the resistance in order to fire off nice buying signals. However, the Thursday session saw the market pullback from the 1.1275 level in order to form a star. The shooting star of course signifies that we could see some real selling pressure picking up in this area. However, I don’t necessarily see this is a sell signal, someone because the market did in fact breakout above the 1.12 level, which of course is an area that I had signaled as being massively resistive. Because of this, I think that we may see a pullback, but this pullbacks probably going to end up being a nice buying opportunity.
So essentially I am looking for some type of pullback that forms the supportive candle that could be bought. I think there is a ton of support between here and the 1.09 level, which would be where the bullish run would and if we broke down below. At that point in time, I would expect this pair to basically come undone.
Divergent central banks.
The two central banks behind these currencies are completely divergent when it comes to attitude. The Federal Reserve has begun to taper off of quantitative easing, which is essentially the same thing as tightening monetary policy. That typically means a stronger currency, and as a result the US dollar could definitely go higher against several other currencies around the world. On the other hand, you have the Bank of Canada, which has recently stated that interest-rate cuts are not out of the realm of possibility right now, which of course that the market. In fact, that’s what the last two major green candles are from, a reaction to that particular statement.
I believe that now that we are above the 1.12 level, we should start to head towards the 1.15 handle. Pullbacks will offer buying opportunities, and that’s essentially what I believe now: we are about to see a nice chance to pick up some “value” in this marketplace, and more and more people should start going to the upside.
