The USD/CAD pair fell initially during the session on Monday, testing the 1.1150 region. However, we managed to turn things back around and bounce enough to form a nice-looking hammer. The hammer of course is a supportive looking formation, and as a result I am with this pair still. I recognize that the market has extended itself a bit, so we could see some type of consolidation in this general vicinity, especially as I see the 1.12 level as possible resistance.
With this, it appears that anytime we pullback in this particular market, it should be considered to be “value”, as the US dollar is by far the strongest currency right now. The 1.10 level below is what I would consider to be the “floor”, and I struggle to imagine this pair falling much lower than that. Because of this, I don’t really have a scenario where I’m willing to sell this pair, especially considering that the Canadian dollar has been kind of beat up lately.
Oil markets aren’t helping.
The oil markets a lot of times can give a little bit of a lift to the value of the Canadian dollar, but I do not anticipate seeing that anytime soon. Because of this, I think that there will continue to be a significant amount of pressure on the Canadian dollar, which will push this market higher overall. With that, I believe that the 1.12 level will be tested, but ultimately it should break above there and continue to go much higher, possibly to the 1.15 handle.
Remember though, the market continues to grind sideways most of the time, and then takes off in one direction or the other, as a symptom of two solidly intertwined economies. Because of this, the pair does tend to be a bit difficult to trade at times, but if you are patient enough you can quite often get significant gains when we finally do get one of those impulsive moves. With that being said, I am bullish but I will have to be very patient.
