- The USD/CAD has been somewhat quiet during the trading session on Monday as we continue to hang around the 50-Day EMA.
- The 50-Day EMA is an indicator that a lot of people will pay attention to get an idea of the trend, so it does make a certain amount of sense that we would be sitting here.
- The size of the candlestick from the trading session on Friday certainly was impressive, but it is interesting to see just how nonchalant Monday was.
If we do break down below the lows of the last couple of days, it opens an interesting recovery phase for the Canadian dollar, which would make a certain amount of sense considering that crude oil is trying to break out. On the other hand, if we break the topic and said we could reenter the previous consolidation area and get very noisy, to say the least. Ultimately, the market is going to look at the 1.38 level above as a major resistance barrier, followed by the 1.40 level. At this juncture, I think that if we were to break above there, the market could really start to take off.
Paying Attention to the Oil Markets
Oil might be the key here because if it really does start to rally, that might make this a bit of an outlier, as we could see the US dollar weakened against the Canadian dollar but reasserting itself against many other currencies. It remains to be seen whether that happens, but it’s obvious that a lot of traders will be conflating the two.
When you look at this market, there is a bit of an argument to be made for a potential “head and shoulders” pattern, but I think that is probably a bit of a stretch at this point. Nonetheless, even if we do break down and confirmed the head and shoulders pattern, it looks like the target would be somewhere near 1.31, which is right around the 200-Day EMA, and an area that previously had been resistive. Regardless, I think you have a lot of chops coming your way, so be cautious and recognize that position sizing will be the most important thing that you can keep in the back of your mind in these times.
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