The EUR/CAD pair broke down during the session initially on Friday, but found enough support near the 1.3750 level to turn things back around and form a hammer. This is of course a very bullish sign, but I have a couple of other reasons to be fairly upbeat about this market now. The 38.2 Fibonacci ratio is just below, the 1.3750 level has been massively resistive in the past, and the 100 day exponential moving averages just below the bottom of the hammer. In other words, I can think of at least 3 reasons to believe that the market is going to continue to go higher and that is what the best trading decisions are based upon, the odds of something happening.
If we break above the top of the hammer for the session on Friday, the market should then head to the 1.41 handle. If we can get above there it should be a bit of a fight to get to the 1.45 handle, but I do think we will eventually head in that general direction.
Oil isn’t helping the Canadian dollar
The oil markets are very stagnant at the moment, and that does not help the Canadian dollar in general. Remember, most people treat the Canadian dollar as a proxy for oil, and since oil isn’t doing anything, the Canadian dollar is into either. All one has to do is look at the USD/CAD pair in order to see how dead the Canadian dollar is at the moment.
Even if we broke down below the 100 day moving average, I still believe that there is enough noise and support below to avoid selling. I may not want to buy a currency pair down there, but I certainly wouldn’t want to fight all of the possible consolidation and support that I see all the way down to the 1.34 handle. With this, I am simply waiting for the hammer to be broken above from the Friday session, and then I will start buying again.