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The USD/CAD pair fell for most of the week, only to turn around and bounce on Friday to form a hammer. This hammer sits just above the 1.01 level, which looks to be supportive at this point in time. Because of this, we suspect that a move higher may be coming. However, we have to pay attention to the oil markets as well as there are plenty of headline risks coming out of the Middle East at this moment in time.
Obviously, if the oil markets can continue higher we should see a run to the Canadian dollar. However, if it is due to fear, there is the possibility that the US dollar will actually outperform the Canadian dollar as nervous traders began to buy U.S. Treasury yet again.
On a break of the top of this week’s hammer, we are willing to buy this pair and suspect that it would run to 1.04 or so. If we can get above 1.04, we think this pair can go much higher, perhaps as high as 1.10 in the long term. As for selling, we see far too much support below the current area to consider it at this moment in time.