The USD/CAD pair continue to fall during the session on Friday, as the market continues to find strength in the Canadian dollar. With interesting is that the oil markets look like they’re ready to go much higher, and the Canadian dollar is finally strengthening. The old correlation had broken down for a while, but it appears that it’s starting to come back into play now, which could make this market a little bit easier to trade. However, that’s not to say that there will be a couple of issues.
The first thing that I see is an issue to the sellers will be the uptrend line that you see on the chart. More importantly though is the fact that the 1.06 level has been massively supportive. That area could bring in a lot of buyers, and the uptrend line would continue to support the market going forward. I personally don’t care which direction this market moves, just that it makes a clear signal. With that in mind, I am on the sidelines the watching this market very intently as I believe we are without a doubt going to make a significant move in one direction or the other based upon what happens in this region.
Oil markets can lead the way, but don’t necessarily have to.
The old correlation of oil in the Canadian dollar is well-known, but what people are not paying attention to his much is the fact that the United States produces quite a bit of its own oil these days. Because of this, the USD/CAD pair might be less sensitive to the oil markets than most people would expect. Granted, there is a little bit of habitual trading when it comes to oil going out and the Canadian dollar going up as well, but at the end of the day the real action as far as oil is concerned these days could be found in the Norwegian krone, or even the EUR/CAD pair as it is a little bit more of a clear correlation to oil exports. Ultimately, I will be watching this pair and either buying support, or selling a break down below the 1.06 handle.
