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The USD/CAD pair rose above the 0.98 handle on Thursday, but fell back down in order to form a shooting star. This suggests that the 0.98 level is now going to be massive resistance as it was one support of a huge consolidation area.
The candle is a classic sell signal, and as such we will be short of this pair if we can get below the lows from the Thursday session. We think that the next 24 hours will be vital in this market, and as such we are more than willing to place a trade. Based upon the larger higher time frames, we are willing to start selling on a break of the lows as we think it could be the beginning of a larger move.
And of course would be nice to have the oil markets move in tandem, but they do look supported at the moment. They sold off quite a bit, but it looks like they're ready to rise again. If that's the case, this pair should continue much lower.
Based upon the consolidation rectangle that we had just broken out of, we suggest that perhaps this market will find 0.92 before it's all said and done. If that's the case, there is quite a bit of room below for this market to traverse. Granted, it will be a straight shot down - nothing ever is - but certainly the trend is down.
Sense signal does go with the overall trend, we are willing to take it. At the 0.9950 level, we would have to consider this a busted trade and go the other direction. If that happens, we think 1.04 will be hit eventually. Nonetheless, we are much more comfortable shorting as the Canadian dollar has been so healthy over the last couple of months.
It seems that the markets are at a pivotal spot right now, and as such paying attention to this particular pair could be crucial. We live in "risk on, risk off" type of environment these days, and this pair could be an excellent barometer of that.