The market has been very difficult to deal with as of late, so you need to keep one eye on the oil market, and the other on the 10-year yield.
The US dollar initially tried to spike against the Canadian dollar on Friday, as we had seen a little bit of a continuation of trouble in the oil markets. The market turned around to show signs of support again and, as a result, it is likely that the Canadian dollar was always going to react. We have been in a downtrend in this market for quite some time, and it certainly looks as if we may continue to see this.
It will be interesting to see how this plays out over the next couple of days because it is difficult to imagine that the trouble in the oil markets are over with. The markets have gotten quite ahead of themselves when it comes to energy, so I think that the oil market desperately needed that move. The Canadian dollar is always a proxy for oil when it comes to Forex trading, so it makes sense that we ended up forming a massive candlestick during the Thursday session, but the shooting star on Friday is a potential continuation of what we had seen for some time.
We are getting close to a major support level on the monthly chart, so it is worth paying close attention to that, and I think that we are going to continue to see a lot of interest in this pair at this juncture. The question now is whether or not the rising yields in America continue to have people looking at the dollar, or if we simply should pay attention to crude oil and short this market. It is possible that this market might be very noisy, but if we were to turn around and take out the top of the shooting star, then it is possible that we have further to go.
I think we need to look at the longer-term charts in order to discern some type of trade, but right now I think the one thing you can count on is a lot of noise as we are sitting around the crucial 1.25 handle. The market has been very difficult to deal with as of late, so you need to keep one eye on the oil market, and the other on the 10-year yield.