USD/CAD fell on Monday as the oil markets got a bit of a boost by the passing of sanctions by the EU on Iranian oil. Of course, this doesn't really take effect until July 1, but none the less, there was a reaction to this in the oil pits.
The parity to 1.01 levels is pretty strong support, but the area also looks like it could be the bottom of a descending triangle as the downward pressure continues. The oil markets will be key, and to be honest, they look a bit heavy at the moment. The falling of the oil markets would cause a rise in this pair if history is to believe. Because of this, we aren't ready to quite throw in the towel on USD strength yet - but are aware that the bullish technicals are starting to fall apart currently.
If the parity level is broken by the market, and the price closes below, we could see the triangle give way in order to find 0.95 or so. The triangle measures 500 pips and the breakdown from parity should give us this level. However, the market in this pair tends to be choppy at times, and we may see more of that as headlines continue to worry traders.
The bullish case can still be made, but the bulls need to get it together fairly quick as time is running out. Of course, if the Iranian crisis gets worked out - this could be just the key for that to come about. Also, poor economic numbers can often push this pair higher as well, but it would have to be fairly significant judging by the behavior of the market lately.
The breakdown has us selling, and we would have to simply ignore the day to day fluctuations as we know this pair to be choppy 80% or more of the time. The fall would be with the trend, and while we don't necessarily feel that it should happen - only broke traders spend much time arguing with the long-term trend. A break above the top of the triangle is what it would take to buy, or perhaps a hammer somewhere in this area would work as well.
USD/CAD Forecast January 24, 2012, Technical Analysis
USD/CAD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3