USD/CAD Technical Analysis October 26, 2011

The USD/CAD pair bounced hard from the parity level on Tuesday, an area that we have mentioned several times over the last week or two. The area offered support, and was urged on by the Bank of Canada not only holding rates on Tuesday, but also being very dovish on the future of the Canadian economy due to the global uncertainty in the various markets. With this in mind, it appears that we could see a bounce in this pair. Also, if the EU doesn’t come together with a reasonable solution to the crisis over there, the “risk off” trade could come back into play – forcing this pair higher as well.

USD/CAD Technical Analysis October 25, 2011

USD/CAD fell on Monday as traders sold the Dollar around the world. The oil markets also managed to break above the $90 mark, and this was massive resistance. The demand for oil could and should push the value of the Canadian dollar up, which of course pushes this pair down. However, the parity level has held for the session, and the level is massive support. Until we close below that on a daily candle, it is going to be very difficult to short this pair. Signs of support and a move upwards from current levels could send this pair go up to 1.03 in short order. In the meantime, we need to see what markets due for the Tuesday and perhaps Wednesday session, and then place our trade accordingly.

USD/CAD Technical Analysis October 24, 2011

USD/CAD fell on Friday and tested the parity support level in the process. The daily close is looking weak, but the level has held up. The market will be highly correlated to the oil markets, and they look ripe for a pullback. Because of this, we suspect a bounce is coming in this pair. The selling of it will be very difficult unless we manage to break below parity, and hold that to a daily close. The market should be observed for the Monday close, and not traded until we see the market’s position at that point.

USD/CAD Technical Analysis for the Week of October 24, 2011

USD/CAD fell on the week, but remains above the parity level that we have marked as massive support. The market continues to be held hostage by the oil markets, and those looks like they could be ready for a pullback. The bounce at a parity level in this pair isn’t a big surprise, and would continue to show how important the “1” level is in all pairs. The pair had a massive explosion to the upside, so this pullback isn’t unwarranted. The candle for the week does look bearish at this point, but if there are any negative headlines out there – this pair will rise as well. At this point, we think a bounce should be coming, and would look for a buy signal on the daily chart.

USD/CAD Technical Analysis October 21, 2011

The USD/CAD pair had a back and forth session on Thursday as traders first sold off risk, only to buy it back in the later hours of the session. This has been a bit of a trend lately: Americans trying to reverse the bearishness out of Europe. The pair will be greatly influenced by oil, and the massive support expected at the parity level. Because of this, we are hesitant to sell it until we close below that parity level. We are looking to see if it holds as support, and would be willing to buy a bullish candle form that area, as the headline risks out there are great, and the Dollar is always king in uncertainty.

USD/CAD Technical Analysis October 20, 2011

The USD/CAD continued to respect the parity support area on Wednesday, as not only the demand for “riskier” currencies fell, but the demand for oil did as well. This was a double-whammy for the Canadian currency, and it showed in this market. The resulting candle is a hammer, and it looks like the market is ready to jump back up on any signs of bad news. If the oil markets move to the downside from here, we expect this up move to continue. Watch oil for the bias, and then trade the Canadian dollar accordingly.

USD/CAD Technical Analysis October 19, 2011

The USD/CAD pair fell during the Tuesday session, and continues to react inversely to the oil markets. The parity level below still keeps this market afloat though, and until we get a close below it on the daily, we are not selling this pair. The 1.0650 level above is massive resistance, but it is far enough that we are interested in buying on a sign of supportive price action, perhaps in the form of a hammer or engulfing green candle.

USD/CAD Technical Analysis October 18, 2011

The USD/CAD bounced on Monday as the trading world started to shun risk assets globally. The oil markets were soft, and so were the equity markets. This sends risk assets down, and in this case – the Canadian dollar.

We mentioned the parity to parity +50 level as a question to be answered. It was the site of a major breakout recently, but hadn’t been retested yet. It has as of Monday, and it shows to be supportive. Because of this, we feel the next leg in this pair is up. As long as parity holds up in this pair – we are willing to buy dips as the global outlook is still very shaking in general.

USD/CAD Technical Analysis October 17, 2011

The USD/CAD continued to fall during the Friday session, and now looks set to retest the parity level. The level is massive support, and far too close for comfort to sell at this level, so unless you are already short – it isn’t advised to be so at this point.

The parity level should offer support, and could produce a long position if we get the correct supportive candle. If we can close below the parity level – this pair continues the long down slide that we have seen over the last several years. The pair is in a downtrend, so this wouldn’t be a massive surprise. However, with headline risks out there, it wouldn’t be a stretch to see this pair raise again either. This pair should continue to be very volatile in the near-term, so tight stops are recommended.

USD/CAD Technical Analysis for the Week of October 17, 2011

The USD/CAD continued to fall this past week, and decidedly so. The pair looks massively bearish, but the parity level is sitting just below the present level. With this in mind, we cannot sell until we get a close below it. The recent action has been a massively bullish break out, followed by a massively bearish break down. This market is extremely volatile at this moment, and is hard to trade for longer-term traders. With this in mind, we want to see what the next weekly candle looks like, and if it reacts to the parity level in a supportive or weak way. Until then, we are sitting on our hands.

USD/CAD Technical Analysis October 14, 2011

The USD/CAD pair rose during most of the day on Thursday, only to fall late in the session. The result is a shooting star at the bottom of a recent down move. The candle could be the start of further weakness in this pair, as the USD finds itself on the back foot against most other currencies. The resulting set up is if the bottom of the candle gets broken – it should see lower prices. The oil markets have proven especially resilient lately as well, and this could continue to drive demand for the Canadian dollar. The parity level could continue to be very supportive though, and we would expect a bit of a reaction to it. A breaking of the top of this shooting star-shaped candle would be massively bullish.

USD/CAD Technical Analysis October 13, 2011

USD/CAD fell hard during the session on Wednesday, breaking several stops along the way. The pair is typically tied to the oil markets, and as a result – we normally will watch both simultaneously. Something odd happened today – the CL contract was very flat, suggesting that this pair should have been very quiet.

With the CL struggling at the $85 mark, this should give pause to selling this pair. The parity level below is our real gauge as to the strength of the downdraft, and this pair hasn’t reached that yet. Quite often this pair will react a couple of days late in the oil markets, so watch the CL and COIL contracts to see future direction as both of those oil contracts look a bit weak at the moment. This would suggest this pair should rise.

However, you would be smart to look for a signal to go long such as a hammer on a shorter time frame before buying. It is at an area that was supportive before, so it will be interesting to see what happens. If we can break the 1.07 over the next few days – this pair goes much, much higher – probably as a result of global bearishness in most markets.

USD/CAD Technical Analysis October 12, 2011

USD/CAD rose, and then fell during the session on Tuesday, forming a shooting star-shaped candle at the end of the session. The pair has recently fallen, and the shape of the candle suggests that trouble could be in store for this pair as the rally failed for the session.

We still see the parity level as a massive inflection point in this pair, and would be weary of selling this pair until we can break below that level. The oil markets will continue to hamper the moves of this pair, and oil is highly correlated to the value of the Canadian dollar. Because of this, anyone trading this pair will have to keep one eye on this chart, and another on the oil markets.

Technically speaking, it looks weak, but there are far too many reasons this pair could shoot back up for us to get bearish at this point. In the mean time, we find sitting still the way to go in this market.

USD/CAD Technical Analysis October 11, 2011

The Canadian dollar appreciated against the Greenback on Monday as trader bought risk around the globe. One of the most heavily bought areas was in the energy sector, especially the oil markets. With this in mind, it is no surprise that the Canadian dollar rose against the Dollar.

The market did fall just down to the support level in the same range we have been watching as a potential buy area. The daily candle does look very bearish though, so we feel that a continuation of the dip could be coming. However, we feel that there are simply far too many reasons to sell the Loonie at this point, and that the pair will likely continue its climb over the next several days.

We are currently looking for a hammer or other such bullish candle in the neighborhood of 1.03 to 1.02, and think this could be a good launching point for more strength. We think that the “bottom” area is the parity level, and a break below that signals continued selling. The overall trend is still down, but we also feel that a massive bounce could be coming as well. We like buying supportive candles at this point.

USD CAD – October Forecast

Substantially lower commodity prices helped drive the commodity-sensitive Canadian Dollar lower throughout September. The sharp decline in crude oil, for example, contributed the most to the strength in the USD CAD. Also lending support to the U.S./Canadian’s strength was the turmoil inEurope.

The overall shedding of risky assets on a global scale has led the Bank of Canada to drastically alter its interest rate forecasts in the wake of a possible deterioration in the overall world-wide economy. This forecast for a tightening of the interest rate differential has led some traders to believe that a shift in investor sentiment is taking place and that a major bottom may have been reached in this currency pair. The current rally in the USD CAD has put this currency pair in a position to post a yearly closing price reversal bottom which often signals the start of a long-term rally.

While equity markets may be best to watch because of their strong correlation to movement in the AUD USD and NZD USD, West Texas Intermediate Crude Oil is the market to watch for predicting direction and volatility for the USD CAD during October. The recent decline in crude oil futures triggered a similar decline in the Canadian Dollar. This relationship is likely to remain over the near-term. So while the interest rate differential is an important fundamental development to watch, the correlation between oil prices and the Canadian Dollar offers more significant information.

Besides the price of crude oil’s importance as a leading indicator, traders should also monitor closely central bank activity and inflation news. In September the Bank of Canada announced a dramatic policy shift when it stated that it saw less need to raise interest rates. This was a surprise because it meant that the central bank was adhering to a more cautious stance about the weakening global economy.

Although the Bank of Canada left its benchmark interest rate unchanged at 1 per cent, it took its previous talk of a rate hike off the table. A rate cut wasn’t talked about but traders will have to wait until the next meeting on October 25 to see if the central bank will mention the possibility of a rate cut. Obviously it has time to monitor the situation inEuropebefore reaching a decision.

The main reasons for the dramatic shift in policy are the slowing global economic conditions and heightened financial uncertainty. Basically global economic conditions have shifted so much since the last meeting in July that the central bank cannot continue with its plans to withdraw monetary policy stimulus. With so many traders banking on an interest rate hike by the end of the year in July, these market players had to make a dramatic shift in their strategies by selling aggressively the Canadian Dollar.

With the BoC’s July forecast outdated based on its September statement, the central bank is now strongly indicating that rates will remain unchanged for the rest of the year. This also means that the European debt crisis, slowingU.S.growth and market volatility are going to continue to exert the most influence on the central bank’s decision making process during October. Since these conditions are not likely to change over the next 30 days, the USD CAD should continue to be supported.

Although the Bank of Canada has turned dovish, interest rates are not expected to be slashed at any time soon. Therefore this leads one to conclude thatEurope’s debt issues and falling oil prices will be the key fundamentals driving the direction of the Canadian Dollar throughout October.

USD/CAD Technical Analysis October 10, 2011

USD/CAD fell on Friday, but managed to bounce in the later hours as the pair retested the 1.03 level. We mentioned that this area could be a place to see support and a potential bounce, and the resulting daily candle is a hammer – a bullish sign. Because of this, we like buying this pair on a break of the high from the Friday session. We know the 1.0650 – 1.07 level is massive resistance, but if it gives way – this pair skyrockets. We are not interested in selling at this point.

USD/CAD Technical Analysis for the Week of October 10, 2011

USD/CAD had a wild week over the last 5 sessions, and continues to be choppy in its ranges. However, the Friday session saw a bullish hammer which could suggest that the next move in this pair is to the upside. The CAD is highly sensitive to risk, and we should continue to see the Canadian dollar sell off anytime there is bad news. The pair looks set to move up – but the 1.0650 level will be massive resistance. If it gives way, this pair could continue much farther to the upside.

USD/CAD Technical Analysis October 7, 2011

USD/CAD continued to fall on Thursday as traders are willing to take on a bit more risk over the last several sessions. The pair is highly correlated to the oil markets, and the announcement of a larger than expected drawdown on Wednesday sent this pair in the downward path. However, the recent impulsive move to the upside suggests that we will eventually see a larger move to the upside. Any bad economic news will more than likely send this pair higher, and if the Non-Farm Payroll number out of America disappoints, this pair will rise as Canada is so heavily dependent on the US as an export market.

USD/CAD Technical Analysis October 6, 2011

USD/CAD broke below the shooting star that we discussed yesterday on Wednesday. As a result, a “perfect” sell signal was triggered. We understand that the 1.0650 area is a massive monthly resistance area, so shorting from here would normally be a good idea. However, we also see the 1.03 area as a potential reentry from the long side as well. The fundamentals for the global economy simply aren’t strong, and as a result – oil should continue to struggle over the longer-term. The pair should be thought of as a “buy on the dips” pair at this point, and we would be willing to buy at the 1.03 level with supportive candles.

USD/CAD Technical Analysis October 5, 2011

After spending most of the day rising, the USD/CAD pair fell hard toward the end of the Tuesday session. The pair formed a perfect shooting star, and it appears that it is ready to pullback. This shouldn’t be too surprising as the market is overbought at this point in time, and that the 1.05 area is acting as resistance isn’t overly surprising either. We see this pullback as just that – a pullback, and not a reason to get heavily short this pair. We think that waiting a couple of days to see a supportive candle is exactly the best way to reenter this pair from the long side.