USD/CAD continued its grind lower on Thursday as the pair fell below the 0.9850 level for the first time in months. The candles over the last three days have all been red, and they look fairly weak in general. However, this pair has many different forces pulling at it currently, and as such, it could be a difficult one to trade.
The two economies in this pair are interlinked in a big way, and the Canadians rely on the US for over 80% of their exports. This causes the currencies to trade in a fairly flat range a lot of the time, only to blast forward in one direction or the other suddenly. The fact is that if the United States weakens economically, the Canadian economy and Dollar can only rise so far. This is because the US simply will buy les products from their neighbors up north.
The pair has fallen quite hard over the last few sessions as the price of oil has risen. This makes sense as the Canadians export quite a bit of oil to the US. However, it should be noted that the Canadian dollar hasn't performed as well as the Norwegian Krone as the Brent markets are really where there is a massive shortage. Truth be told, the Americans have plenty of oil at the moment. With this in mind, it also now makes sense that the move down hasn't been as strong as many people would have imagined it to be.
With this in mind, there is also a lot of support areas on this chart. The 0.98, 0.9750, and 0.97 will all offer potential support levels for this pair to bounce from . Because of this, we are hesitant to sell it. Also, one has to wonder how much longer the spike in oil has left in it before the world runs to the Dollar because of fears of recession. In order to gain from the oil trade, we prefer Norway at this point. This pair will more than likely fall over time, but the price action will be very choppy as the support levels are so tight. Buying isn't possible yet either, as the action is so bearish.
USD/CAD Forecast March 2, 2012, Technical Analysis
USD/CAD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3