By: Christopher Lewis
USD/CAD fell during the Tuesday session as the oil markets gained again. The Dollar sold off in general, so the fall in this market wasn’t a big surprise. The market is presently being held captive by the shenanigans going on in the Persian Gulf, and more specifically Iran.
As the Europeans and Americans are presently trying to set up an embargo of Iranian oil over the aggressive nature of the Iranian nuclear program, the Iranians are threatening to block the Strait of Hormuz, a place that sees 1/6th of the world’s oil pass though.
Because of this, the oil markets are probably higher than they deserve to be. This is especially true as the demand continues to fall overall with the world going into recession in various places. The headlines continue to rock this market back and forth, and continue to make oil traders nervous as we can see by the erratic behavior between $105 and $95 in Light Sweet Crude contract.
Lately, the US economy has shown signs of relative outperformance against the rest of the world. This is often good news for the Canadian economy as it sends over 80% of its exports to the United States. As a result, this pair can sometimes grind sideways and do little in the way of movement for periods of time before a massive break in one direction or the other.
Symmetrical Triangle
Over the course of the last couple of months, this pair has formed a symmetrical triangle. The pattern is fairly even, so it suggests that perhaps the market has no real “inclination” as to which direction to go. However, there is one clue that might come into play as far as I can tell: The massive support area from 1.01 to 0.99 that has been so strong.
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The 200 pip zone is just below the triangle right now, and the daily candle from Tuesday being a hammer lends credence to the idea of serious support below. Also, with the headline risks out there, it wouldn’t be a real stretch to see Dollar strength. However, I wish to see a daily close above the triangle’s downtrend line in order to buy. In the mean time, I think of this as a scalper’s market, and could try a small position long on a break of the top of the Tuesday range.