By: Christopher Lewis
USD/CAD continued to hover around the parity level on Thursday, and the market saw a decent reversal for the session. The pair is often moved by a couple of factors such as risk appetite and oil markets, and will find itself being influenced by a myriad of factors at the same time quite often.
The day saw fairly bullish sentiment for the US dollar as the risk appetite was fairly weak globally. The pair moved towards the upside as a result, and the parity level was broken yet again. However, as the rumors coming out of the EU that perhaps the ECB was willing to swap shorter-term bonds for longer-term ones with the Greeks, the market suddenly found risk as attractive.
The oil markets of course have come into play as per usual. The oil markets are being pushed around by the ongoing Middle East tensions involving the Iranians, and oil markets will continue to offer a bit of uncertainty into this pair. Because of this, in many ways the ongoing drama in Tehran will have more of an effect on this pair that what happens in Washington D.C. or Ottawa.
Running in circles
The pair has found the parity level to be a comfortable area, and I believe this could be the case for a while. The pair will often grind sideways and consolidate for long periods of time, only to make a sudden move. The pair is highly correlated with several different factors at the same time, so the pair is really a study in whatever the market is focusing on at that moment in time.
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The current levels look like they could be where we find this pair for a while, and the 1.01 level is in my opinion the “top” of the current market. The levels running lower show support at several spots including the 0.99, 0.98, and 0.9750 levels. It isn’t until the 0.9750 level is broken to the downside that I see significant selling opportunities beyond scalping. With this in mind, I am waiting for a breakout of this very messy consolidation to go forward.