USD/CAD rose during the session originally as the oil markets fell for the day. However, as time wore on, the pair gave up most of its gains, and the resulting candle is a shooting star at the bottom of a massive descending triangle.
The triangle hasn’t broken one way or the other yet, but the market shows us during the session that the pressure to the downside continues. The breaking of the bottom of this triangle has traders looking for the 0.95 level, and if we get a daily close below the parity level – we are short until we see that level.
The pair has a long history of grinding and then making sudden moves, and it looks as if the pair is trying to wind up for another shot in one direction or another. The pair will tend to follow oil, so the fact that the Canadian dollar looks strong while the oil markets look a bit weak is a bit of a conundrum. However, one can only play the hand dealt, and this chart currently looks like it could give a sell signal at any time. We won’t buy until the top trend line of the triangle gets closed above on the daily chart.
The Canadian dollar will often grind quite a bit because of the close proximity of the two economies, and the fact that Canada sends 80% of its exported goods to the US. If the US is doing well, so is Canada. However, it doesn’t work the same in reverse as Canada isn’t a huge market for the Americans. The flow of money across the borders is however, quite massive.
Although the oil market looks weak, we could see a breakdown in this market simply because the Dollar is weak. The last couple of sessions have been rough on the Greenback, and as a result a sudden drop down to 0.97 isn’t necessarily ruled out. Again, we would buy if we could get the close above the top line of the triangle, but it is looking more and more unlikely that we will see that happen. More than likely, a close below parity has us short of this pair.