The USDCAD pair initially fell during the session on Thursday, but found enough support at the 1.07 region to turn things back around and form a hammer. Will we find particularly interesting about this market is that it seems so well supported, even as oil prices went so much higher during the day. This tells us that this is truly a strong dollars scenario, and has absolutely nothing to do with what the oil market is doing currently. In fact, you can make a serious argument for this being a sign of US economic strength, as both the US dollar and the oil markets rise of the same time, something that typically doesn’t happen.

Going forward though, we recognize that there is a significant amount resistance just above at the 1.08 level. If we break above there, we think the market would go much higher, but recognize that it would probably be choppy due to the fact that it would be reentering a consolidation area from before that extended from 1.08 to the 1.10 level. Is a significant area, and we do believe that this market will eventually be taken over by the buyers, but we recognize that during this time he year it might be difficult to build up enough momentum to make that happen quickly.

On top of that, this pair does tend to be rather choppy from time to time, and then eventually settling on some type of impulsive move. It’s very likely that’s what we will see, and as a result we actually prefer buying dips for short-term trades knowing that sooner or later the market will break out and take us along with it. That of course is our plan, but we also recognize that there is the possibility that we could break down from here too. However, there is a significant uptrend support line below, and as a result we are bit hesitant to think that’s going to happen anytime soon. Down there, there is the 1.06 level which is so supportive also, so quite frankly we still favor the upside.

Editor’s Note: Equity investors/traders can use the CurrencyShares Canadian Dollar Trust (FXC, quote) ETF to take positions in the euro without a FOREX account.  The ETF looks to track the price of the euro (USDCAD), minus ETF fee. The fund seeks to reflect the price of the Canadian Dollar with the shares representing a cost-effective investment relative to investing in the FOREX market.

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