USD/CAD fell on Friday, but did manage a bit of a bounce as the Dollar got a bid in the US session. The oil markets fell, and this always gives the Canadian dollar a bit of a selloff. The hammer looks like it is based upon the 1.02 area, and that the upside is more than likely the next move. We see massive support all the way down to the 0.99 level, so selling at this area isn’t possible to us anyway.
Going forward, we will be watching the $103 level in the Light Sweet Crude markets. If this level gives way to the bulls, there is a real chance this pair could fall rapidly. However, there is a ton of support below all the way to the 0.99 level, and the move down is more than likely going to be met with a lot of choppiness at first.
A break to the upside makes more sense to us as the Dollar should continue to get a “safety bid” going forward. The 1.03 level could be resistive, but it should also only be a minor area to overcome as it has been broken to the upside and downside several times recently. The real volume coming back in January will be vital to the future direction of not only this pair, but the oil markets in general, both of which as interconnected.
The Canadian economy could start to suffer from the global slowdown, but the biggest customer of Canada is the United States. This is one of the things that keep the Loonie elevated. The relationship should continue, but the oil markets losing luster could be good for about 10 handles before it is all said and done. The pair has several resistance points above in the form of 1.05, 1.07, and 1.10. The levels will all continue to produce reactions, but we shouldn’t forget that this pair melted up a few years ago during the financial crisis. If we have a meltdown in Europe, this pair will skyrocket much quicker than expected. Either way, we will only buy on dips as long as we are above the 0.99 level.
USD/CAD Forecast January 2, 2012, Technical Analysis
Originally posted here
