The USD/CAD pair fell hard during the session on Thursday, as we start heading towards the 1.10 level. This level is massively supportive in my opinion, and I believe it extends all the way down to the 1.09 handle. It is because of this that I’m not quite comfortable selling yet, although I must admit that this pair does look rather weak at the moment.
With that being the case, I feel that watching this market for the next couple of sessions is probably going to be the best course of reaction for me. I do think that a supportive candle just below would be a nice buying opportunity though, as we should continue to bounce from there. A bounce from there could lead right back to the 1.12 level, and then possibly much higher than that with the 1.15 level a possible destination.
Long-term choppiness?
This pair does like to chop around quite a bit, so one has to wonder whether or not this is the beginning of longer-term choppiness. Quite frankly, this is one of this pair is that you have to be very patient with, as the two economies are so interconnected. Because of that, it makes sense of the market will go sideways for long periods of time before ultimately breaking in one direction or the other. Because of this, the pullback really isn’t that big of a surprise, but I would in fact be surprised if we broke below the 1.09 level, simply because it would be such a very bearish move and exaggerated by the fact that it happened so quickly.
If we did manage to break down somehow, I believe the market would head towards the 1.06 level, which is the next massive support area below. That would be a 300 PIP move to the downside that we could eventually see. Watch the oil markets though, they quite often can be a harbinger of the direction that we are about to see play out in the Canadian dollar. With that in mind, I am in a wait-and-see mode at the moment.
