The USD/CAD pair fell during the session on Friday, as the 1.04 level offered far too much resistance for the buyers. The candle following the way it did of course suggests that the sellers took over, and it does in fact make the hammer from the Thursday session a hanging man. This of course is a very negative sign, but we also have to look at the support down at the 1.03 handle, which the market did bounce from towards the end of the day on Friday.
This is not to say that I think this market can go any lower, quite the opposite. I think we could continue to fall, but we need to see the US dollar could beat up in general. Right now, it looks like it could enjoy gains this coming week against the British pound and the Euro. Under that scenario, it wouldn't surprise me at all to see this market bounce and the Dollar gained against the Loonie.
Oil markets of course have a place in the equation
Oil markets of course have a direct effect on the Canadian dollar most of the time. That being the case, if oil bounces from current levels, that could be enough to drive this pair lower. However, I do not feel that we break through all of the support into we close below the 1.02 level, something that is going to take some serious strength to the downside in order to accomplish.
I think eventually we could find support between here and the 1.02 handle, and as a result I am actually going to wait for supportive candle. The oil markets could change my mind, but right now I think that we will probably see the US dollar enjoy a little bit of a reprieve over the next couple of days, so supportive candle closer to the 1.03 handle could in fact offer a nice short-term trading opportunity to the upside. Granted, I think it's probably a bit much to expect this market to breakout above 1.04, but as you know anything is possible.
