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The USD/CAD pair did very little during the Monday session as we formed a decidedly neutral candle. The market is being supported just under the 0.99 level, and it looks like we are going to tread water for the short term.
We mentioned previously that we thought there was quite a bit of support below going all the way to the 0.97 level, and the market action over the last several days really hasn't done much to change that opinion. Because of this, we think that rallies could be sold if you are patient enough. However, the 0.97 level should be supportive and we will have to pay special attention at that point. If we get some type of support at that level, we would be willing to turn around and buying this market. However, you have to keep in mind that the trend is down and therefore respected.
Naturally, the oil markets will have to be observed as well if you're going to trade this pair. It should be noted that the light sweet crude market did form a hammer just above the $95 level in order to look very supportive at the end of the Monday trading session. This suggests to us that this market should fall over the next several days, but it should be noted that we are definitely on top of a lot of noise right now.
Because of this, it might be difficult to trade this pair if you do not have the stomach for volatility. This is going to be more of a grind lower, so if you are someone who needs momentum to feel comfortable trading, this will not be the pair for you. There is however an argument to be made for gold as well, which is a minor influence on the Canadian dollar. As gold looks set to breakout, this should weaken the US dollar and strengthen the Canadian dollar overall. Because of this, we think that although this market looks a bit extended at this point in time, it will eventually fall again. We are selling rallies, and breaks lower.