The USD/CAD pair initially fell during the session on Tuesday, but found enough support at the 1.26 region to turn things back around and form a hammer. This hammer of course is the second one in a row, and that of course suggests that the US dollar will continue to strengthen. On top of that, the oil markets are working against the Canadian dollar hand over fist, and with that, I think we have a bit of a “perfect storm” in this pair as we should continue to go higher.
More importantly, for the technical analysts out there, we have broken out of a descending triangle, and tested the former downtrend line for support. That support seems to have held, and now looks like we are going to continue going higher. With that, I think we will in fact head towards the larger resistance barrier at the 1.30 level, which was the previous massive ceiling in this marketplace.
Look at the longer-term charts.
Looking at the longer-term charts, you can see that the 1.30 level offered enough resistance during the financial crisis to turn things back around several times. With that, it makes sense that the pair will react to that as resistance. If we can get above there, this would become more of a longer-term buy-and-hold situation. However, you have to recognize that is going to take quite a bit of momentum to break out above there, and as a result it is one of these moves that will take a massive amount of effort.
If we can get above the 1.30 level, again, something that I think is akin to a Herculean effort, this should be one of the easiest long-term trades out there. Pullbacks at this point time should continue to be buying opportunities as well, and as a result I think that you have to look at every time that this pair falls, it is simple value in the US dollar, or rather the US dollar simply being “cheap.” I have no interest in selling this pair at all.
