USD/CAD continues to be a focus of my trading lately, as the economic situation worldwide has put the oil markets into the forefront of the trading world. In fact, it even appears that the economic situation is finally gaining the upper hand to headlines and rumors as the Iranian situation simply cannot move the price of oil any longer. Because of this, the USD/CAD appears to be following more of a “Risk on, Risk off” mode now – just like oil itself.
The market has been bullish of the Canadian dollar for some time now, and one has to wonder if the US dollar hasn’t been oversold against it. There is certainly an argument for this as one can simply point out the fact that the Canadian economy is heavily dependent on the United States for its profits. In that sense, the Canadian dollar is highly correlated with the US dollar.
The recent movement in the world’s markets seem to point towards a breakdown in global growth, and because of this, the USD/CAD pair will be subject to spikes on headlines that could move this pair to the upside over the long term.’
1.02 And a shooting star
The 1.02 level has been one that I have been writing about and paying attention to for some time. The level is obviously a support zone that has kept this pair higher. The trend since late April has been up, but the last couple of weeks hasn’t been kind to the Dollar overall in this pair. The area formed a shooting star though, and this does give me cause for stepping aside at the moment.
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However, the shooting star does allow a simple set up. The top of the shooting star represents the push down by the bears on Monday. If we break above it – all of those sellers are now losing money and this would have a lot of short covering in this market. Of course, a break below the 1.02 level on a daily close – this pair falls to the parity level. We have a nice binary decision at this point, and this is exactly how I am playing the next 200 pips.