The USD/CAD pair balance all the way above the 0.98 handle, but by the end of the session fell in order to form a perfect shooting star. The 0.98 handle as you know was the support that I had been talking about in a massive consolidation area previously. This consolidation area when all the way up to the 1.04 level, and as such it does measure for a move down to 0.92 now that we've smash through supportive area.
The fact that we have a bounce back up to retest the former support as resistance is classic technical analysis, and has me believing that we are about to embark on this large move downward. I don't think it will be an overnight thing by any stretch of imagination, but there is a positive swap in this pair and plenty of room to move on the downside.
Oil and the Middle East
Currently, the oil markets have been falling as of late but we did see a hammer just above the $90 level in the light sweet crude market on Thursday. This does suggest to me that we are about to see a rise in crude oil prices again. There are more than enough catalysts in the Middle East alone to cause a spike in oil prices. Certainly, with all of this unrest it would be hard to imagine a situation where oil jumps three or four dollars a barrel in rather short order.
If this happens, the Canadian dollar should benefit as it would certainly attract more business via the oil markets as Canada is a much safer place to purchase from. Being a petro currency, the Loonie will do quite well on this type of situation. Because of this, we think it is very feasible that oil and the Canadian dollar both will rise in value over time. Certainly, the Federal Reserve cranking up the printing press and extending quantitative easing certainly won't fight it. I think the path of least resistance is lower, and as such will begin shorting this pair on a break of the lows from Thursday.