By FXEmpire.com
The USD/CAD pair fell during most of the week over the previous five sessions, but he did manage to bounce on Friday that formed a hammer. This is very interesting as it appears roughly around the 0.99 level; an area that we suggested could be support.
Obviously, if you’ve been trading Forex for any length of time you know that the oil markets have a great influence on the Canadian dollar’s value. It appears that the oil markets are about to break down, which is interesting that on Friday he had a move higher in the oil markets while the Canadian dollar actually lost value. This is a strange divergence, and before it’s all said and done these two markets normally return to the normal relationship and relative short order.
So the real question is going to be whether or not it is oil that has to fall in order to justify this chart, or that this chart needs to fall in order to justify the oil chart. Nonetheless, we think that this area could provide a little bit of a bounce as this market has essentially been range bound between that the 0.98 and 1.04 for several months going back to the end of last summer.
If you were to take a long position based upon a break of the top of this previous weeks hammer, you would of course have to be very patient as the marketplace will be choppy. There was talk about the Obama administration releasing the strategic petroleum reserve in the near term that hit the wires during the Friday session, but it’s hard to believe that the oil markets would react with anything more than a passing interest in what essentially would be about a week’s worth of oil flooded into the market.
We still prefer to sell this market, but perhaps it is time for a little bit of a bounce. This would make sense as it has been sold so relentlessly over the last couple of months. We prefer to sell rallies, and think we will actually get our opportunity in the near term based upon some weak daily candles.
Click here to read USD/CAD Technical Analysis.
Originally posted here
