By: Christopher Lewis
The USD/CAD pair has been a range bound market for the last few months. The pair is often a grinding one, so the market can be frustrating to those that are looking for momentum plays, but if you are comfortable with range trading, this pair can be a great one for you to trade.
The pair is often a difficult one to trade fundamentally, because the two economies are so interconnected. The oil markets can push the Loonie, but at the same time higher prices can sap demand out of the US, which in turn will drop the value of oil – and the value of the Loonie. As you can see, this pair can be difficult at times – especially in volatile energy markets.
The pair has been stagnant lately, but don’t be fooled: this pair can take off suddenly as well. Often, we see a bit of sideways action for some time, and then a sudden move. I think that perhaps we are in one of those times right now, and the oil markets certainly are trying to figure out the next move as well. Once that is decided, this pair should decide which direction to go.
Parity still looms large
The parity level still seems able to push this market down presently. The 200 day EMA is just above, so this gives me another reason to be careful on any longs. Because of this – I am in “sell only mode” until we break well above it, perhaps the 1.01 level as a trigger. The resistance certainly looks as if it could run all the way to that level.
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The bottom of the range is at the 0.99 as far as I can see, although I feel the bias is to the downside. This market is more of a scalper’s market at the moment, and because of that I will sell this pair on a break of the lows from the session but only expecting a return to the 0.99 area. As a result I will only aim for about 50 to 70 pips.