The USD/CAD has pulled back just a touch against the Canadian dollar near the crucial 1.37 level, as that level continues to be important. With oil fighting back against the sellers, this pair tilts toward the CAD at the moment.
USDCAD
The US dollar has pulled back just a touch against the Canadian dollar as the 1.37 level is offering a bit of resistance. This is a very important level for me at least because if we can get above maybe 1.3725 then it opens up the possibility of a much deeper correction to the 1.39 level. That is basically where the 200-day EMA sits and of course that would attract a certain amount of algorithmic and technical trading.
Keep in mind that the crude oil market is trying to turn things around after selling off for a couple of days so that is part of what is going on here, but we also have to keep in mind that this is a market that tends to be very choppy and sideways overall. Because of this, I think you have to be very cognizant of the fact that big extended moves typically do not happen.
Support and Resistance Levels
That being said, if we do fall from here, I think the 1.35 level makes a certain amount of sense as it is a large round psychologically significant figure and an area that has been important multiple times in the past. I would anticipate a lot of noisy behavior, but as things stand right now, I think the US dollar will move in harmony against the Canadian dollar with other currencies such as the Euro, the British pound, the Japanese yen, etc.
At this point, it looks like the US dollar is slumping just a bit, but I do not think it is disastrous at this point. Keep in mind that most traders look at the US dollar against the Canadian dollar through the prism of either trading oil or the fact that it is very choppy like the Euro against the pound or the Australian dollar against the New Zealand dollar.
You do get paid to get long of this pair and that is one thing that I am paying attention to. So, if I get some type of pullback and a bounce, I might even try to front-run that breakout above 1.37 because at that point in time I think it becomes much more obvious.
Potential signal: Buying USD/CAD above 1.37, with a stop at 1.36, and a target of 1.3885.