Recently, we have seen the US dollar/Canadian dollar pair consolidate in a symmetrical triangle, breakout, and then pulled back several times. We are currently sitting just above that triangle which should be rather supportive. With that in mind it makes sense that we could find buyers in this general region, at the very least trying to fulfill the overall sideways range that we have been in lately.
The 1.3250 level should be thought of as important and supportive, as it was an area that launched the market much higher as we tried to reenter the triangle previously. Ultimately, the fact that the 61.8% Fibonacci retracement level sits right there doesn’t hurt either, or it gives you plenty of reasons to think that perhaps we are going to find buyers.
Looking at the action on Tuesday, it’s obvious that the daily candle stick that is trying to form a hammer is a very bullish sign and it suggests that we are in fact finding plenty of people interested in this market. Keep in mind that the Canadian dollar is highly leveraged against the oil market, which is finding a bit of resistance just above current pricing.
To the upside I see a significant amount of resistance near the 1.34 level and then again at the 1.35 handle. We are simply going back and forth so there’s no real reason to try to outthink the market, simply go with the flow that we have seen as of late. If we do break out of this range then obviously we have a longer-term trade to take. You could start to put more money to work if we get that type of move, but in the short term it looks like we are simply going back and forth, which is the normal state of things in this pair as the two economies are so highly levered towards each other.