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The USD/CAD pair fell during most of the session on Friday as the Canadian jobs number was outstanding. However, by the end of the session we got quite a bit of a bounce and formed a hammer that centered just below the 0.98 handle.
This pair should continue to find buyers in this general vicinity, but the oil markets must be followed in order to truly understand where this pair wants to go. The light sweet crude market should continue to drive this pair back and forth, and it must be said that as oil sold off during the Friday session, the US dollar gained against its northern counterpart.
The 0.98 level was the bottom of a massive consolidation area, and as such the market seems to have plenty of support in the general vicinity. Granted, we did manage to break down to the 0.9650 level, but it has been a straight shot up since then. Because of this, we are starting to think that perhaps this pair wants to reenter the previous consolidation zone from 0.98 to the 1.04 handle.
We see a significant amount of resistance at the 0.9950 level, and a move above that area should signals this pair going much higher. Depending on what happens in the oil markets, this will more than likely move the markets in one direction or the other. The Middle East of course is always capable of producing some type of negative headlines that will drive crude oil much higher, and as such we expect even if this pair wants to go to 1.04 that it will struggle as there will be a lot of back and forth with headlines coming out.
The Canadian dollar should be one of the more favored currencies going forward if we can get some type of reversal in the oil markets. The currency pair is one that has a history of going sideways for some time, so we won't be surprised if we actually start to form a small consolidation zone as we had seen the previous two weeks. However, we think that in the long run this pair will show itself as being negative if we can break the bottom of the Friday range. Because of this, we think that the 0.97 level is the signal to go short, while the 0.9950 level is signal to go long.