The USD/CAD pair was very quiet during the session on Wednesday, which is rather surprising considering the oil markets fell precipitously. There is talk of the Saudi oil minister willing to release more crude oil to suppress prices, and several ETFs that track oil prices were said to have had massive outflows during the session.
In this environment, you would expect the Canadian dollar did do quite poorly. However, this pair also features the US dollar, which of course suffers at the hands of the Federal Reserve and its quantitative easing program. Because of this, it looks like one somewhat counterbalanced the other.
In the end though, I think that the most important thing to pay attention to on this chart is the 0.98 handle. This level was the bottom of a massive consolidation rectangle the when back about 18 months, and since we broke through it, this does suggest that there is much more bearish pressure in this pair than bullish.
Retested for resistance?
For me, the 0.98 handle will tell the story in this currency pair. If we can get a little bit of a rise in price, I would love to see the area hold as resistance in order to start shorting again. However, on the other side of that trade if we managed to break up and above the 0.9950 handle, I would become very bullish of this pair. It would more than likely run back to the 1.04 level which was the top of the consolidation area.
The oil markets will be crucial in this currency pair going forward, but also you have to be cognizant of the fact that the Federal Reserve is pumping money out into the system again. By all accounts, the Canadian economy is much sounder than the American one, so this also adds credence to the idea of shorting this pair. However, the Canadian suffer one massive problem: 85% of their exports go to the United States. With this in mind, we could see a lot of choppiness in this pair, as we grind lower.