The USD/CAD pair did very little during the session on Monday, continuing to hang about the 1.0350 handle. It does show that there is a little bit of support there, and as a result the hammer like candle that printed for the session is not much of a surprise. This is a market that looks like it's essentially trapped between the 1.0350 level on the bottom, and the 1.04 level on the top. Because of that, I think it's going to be difficult to trade it for the short-term, but eventually we will get the breakout that we need.
That being said, I am waiting for a daily close above the 1.0425 level in order to start buying this pair and aiming for the 1.05 handle. On the other hand, if we did break down from here I believe that the market is far too congested until we hit the 1.0250 level in order to start shorting. That being the case, I'm simply looking to buy at this point in time, but recognize that the market may or may not give us that opportunity.
The Federal Reserve and the oil markets both will play a role in this market.
Of course, the world pays attention to the Federal Reserve and whether or not they are going to taper off of quantitative easing. While that isn't necessarily as much of the question at the moment, it still matters in the long term direction of this pair.
That being said, the oil markets also have a massive effect on this market, and if they get a little bit of a bounce, it's not a real stretch of imagination to see the Canadian dollar gain strength. In fact, it's probably going to take a strong loyal market in order to break down the support that sitting just below the current pricing. Because of this, I feel that this market is probably going to stay in a relatively tight range shortly, but have more of an upward bias overall. Even with that though, I still need to see a daily candle close above the 1.0425 level in order to start buying.
