The USD/CAD pair tried to rally initially during the day on Wednesday, but struggled as we approached the 100 day exponential moving average. This is a moving average that a lot of longer-term traders like to use, so it is not surprising to me at all that perhaps a little bit of resistance appeared. On top of that, there is an area between 1.22 and 1.20 for that seems to be a bit of a “no man’s land.” With that, I think that seeing a somewhat resistive albeit neutral candle in this area suggests that perhaps we are going to start falling again.
I’m not looking for any type of meltdown, but a gentle drift lower would make a lot of sense. After all, the oil markets look like they are trying to find some type of support in the same general timeframe, and with that it should bring demand for the Canadian dollar. I can’t say that it’s going to happen at the same time, but they do tend to move in tandem over the longer term.
Cautious going forward
I would expect a lot of volatility in this pair. I think even if we do break down below the bottom of the candle for the session on Wednesday, which would be the trigger that I would use to start selling, I think that it’s probably only a matter of time before a lot of volatility and choppiness appears. With that, I think that we will more than likely see quite a bit of hesitation and back and forth in order to settle this issue. I still believe that the 1.20 level below will be important, and I think that we won’t break through there too easily. We certainly won’t break through the 1.19 level to easily. The question then is whether or not we can sustain any type of rally in the Canadian dollar? After all, oil will certainly have a large part to play. You will have to watch both markets at the same time.
