The USD/CAD pair had an interesting week as the initial move was lower, but by the Friday close we had this pair slamming into the 1.03 level. The area is massive resistance at the moment, and we think that a lot could be settled at this price if we get a significant breakout.
The candle for the week is a bit of a hammer-like shape, and the pressure certainly looks as if the pressure for the bulls is increasing. The oil markets are falling apart, and it should bode well for the Dollar in Canadian dollar terms. The CAD is highly sensitive to the price of oil, and as the oil markets have been absolutely soft, the value of the CAD has fallen. The most interesting an obvious level on the Light Sweet Crude is the $90 level at the moment. If it gives way, the Loonie will suffer and this pair will break above the 1.03 level in reaction.
The risk off attitude of the markets certainly isn’t helping the CAD either. Although it is highly correlated to the United States and its economy, it is considered to be “riskier” than the Greenback. As forex is a relative market, the CAD should continue to suffer as long as there is a sense of impending bad news. Certainly the situation in Europe isn’t going to be a help for the CAD as the biggest trade at the moment is to buy US Treasuries, which of course need US dollars to be bought.
The economy in the United States is doing relatively better than most places around the world at the moment, and this should keep the Loonie somewhat buoyant, just not in this pair. The oil markets simply have to find a footing in order for the CAD to gain in value again for any significant amount. We are buying a daily close above the 1.03 level, and supportive candles in the parity to 1.01 levels, as the zone looks very supportive. It isn’t until a close below the parity level that we could sell this pair.