The USD/CAD pair rose during the session on Tuesday, breaking the top of the hammer that had formed on Monday. This pair has been fairly parabolic of the last week or so, but that’s typical in this market as it tends to go sideways for long periods of time, and then suddenly jump or fall drastically. That being the case, we have closed above the 1.09 handle, and crashed into the 1.0950 level. I still believe that the market is heading to the 1.10 level in the short-term, and quite frankly it could happen during today’s session. However, after that things could get interesting.
It’s at the 1.10 level that I would expect sellers to step into the market, simply based upon the row number aspect of that level. On top of that, the oil markets don’t have much farther to fall before finding significant support, so I begin to wonder whether or not the Canadian dollar can continue to depreciate at this rate. I really doubt it, and I think a pullback is more than likely to happen once we hit the 1.10 level.
Being patient will be key to making profits.
I believe that if you are not involved in this pair at the moment, you simply can’t get involved 50 pips from such a large figure. Because of this, patients will be needed and you will have to wait for some type of pullback in order to take advantage of “value” in a market that is obviously leaning in one direction. The alternate scenario of course is that we just go straight through the 1.10 handle, and although it is something that I don’t anticipate, it’s not exactly impossible. If that happens, a daily close above that level would be enough to get me to start buying again.
Nonetheless, I believe that pullbacks will be met with significant support, especially if you can get the market as low as the 1.0750 handle, which is the site of the most recent breakout. I believe that the absolute floor in this market right now is the 1.06 handle.
