The USD/CAD pair initially rose during the course of the session on Friday, but just as we sold during the Thursday session, sellers came back into the marketplace and pushed the market back down below the 1.25 handle. By forming a shooting star on both Thursday and Friday, I suspect that we are going to have a significant pullback, but ultimately I believe that the 1.22 level below is going to be supportive. I think this is a short-term pullback, but it is a decent selling opportunity in this marketplace.
Never forget that the Canadian dollar is highly influenced by the oil markets, and as a result you will have to watch both of those markets in order to make a prudent trading decision. Ultimately though, there is a lot of volatility waiting to happen, and with that I feel that there is quite a bit of danger when trading this pair at the moment.
Noise above
Even though the market has been rather bullish lately, it makes sense that we would run into quite a bit of resistance near this area as the 1.25 level is not only a large, round, psychologically significant number, but it is also the beginning of a significant amount of noise. There’s a lot of downward pressure as this was once the bottom of an ascending triangle. That of course is a bearish sign, but we have to see whether or not oil markets can rise, because quite frankly that’s probably the one way that this market truly breaks down.
If we do manage to break down below the 1.22 handle, the market should then head down to the 1.19 handle given enough time. It is very unlikely that this market will be one that will be for those of you will have a lower risk tolerance, but looking at the set up that is on the chart right now, I still think short-term selling opportunities should present themselves.
