By: DailyForex.com
The USD/CAD pair continued to confound traders around the world on Tuesday as the pair approach the 0.98 resistance area, and seem to have negated everything that had been printed over the last few sessions. However, we are now in a situation where we have a couple of shooting stars and a couple of hammers all within about 50 pips of each other, and this of course means confusion.
One of the things that I find most interesting about this pair is the 0.98 handle was the support level for a larger consolidation area that ran all the way to the 1.04 level. Because of this, we broke down below the 0.98 handle I suspected that we could be seeing the start of a larger move to the downside. This would have been confirmed by moves in the oil market, but we have recently seen a turnaround in that market which of course has a major influence on this particular currency pair.
The candle for the Tuesday session not only rallied after initially falling, it has actually close above the 0.98 handle. This ending of itself has enough bullishness to it to have me being very uncomfortable selling this pair now. However, I can't buy it either as there seems to be quite a bit of resistance all the way to the 0.9950 level.
As usual, oil will be the key
I personally think that the oil markets will eventually go much higher, especially considering all of the issues in the Middle East currently. However, the market seems to be a little bit spooked by the lack of global growth recently, and as such we are pressing against fairly significant support levels. It does look like the link sweet crude contract is going to try and get below the $90 level, and if it does this of course would be very bearish for the oil markets.
Nonetheless, I do think the long-term trend is still down in this particular currency pair, and as such I am much more comfortable selling this pair if we can only get below the 0.9750 area which is essentially the bottom of the range for Tuesday.