The USD/CAD pair has been a difficult one to trade for some time now. Looking at the weekly chart, you can see that we have been stuck in a fairly tight range. The pair has been hovering between the 0.99 and 1.01 levels for some time now. The markets are being held hostage by the oil markets, and that market has been fairly erratic lately as troubles with the Iranians continue to cause issues globally for the markets.
The Canadian dollar often enjoys a high correlation with the price of oil, but in times where it is a crisis driven move, the Dollar and oil can actually rise at the same time. Because of this, any major action in the Strait of Hormuz by the Iranians is likely to see funds flowing into the Dollar, and this pair rising, which is counterintuitive to most traders as the price of oil would rise too.
The chart does look like the 0.99 level is supportive all the way down to the 0.97 mark, and as such we actually prefer the long side of this trade. However, we don't have the price action to suggest that we are ready to rally yet. In fact, the 1.01 level needs to be broken to the upside in order to go long, as it has been resistive, and it is also the top of the shooting star from the previous week. A break of that top would show massive strength in our eyes. Selling isn't possible until we get below the 0.97 level as the support has been so strong as well. Either way, this pair looks as if it is ready to wind up for a move.
The nature of this pair is to go sideways for a while, and then make sudden moves. This is because of the interconnectivity of the two economies. The next sudden move is coming, but we need to see a breaking of one of the two aforementioned levels to jump on board as the pair can move sideways for great lengths of time.
USD/CAD Forecast for the Week of March 19, 2012, Technical Analysis
USD/CAD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3