(MENAFN- Daily Forex) The has fallen rather hard during the trading session on Friday, as oil has taken off. Because of this, it looks as if the US dollar is going to leave the 1.35 level behind, and if we can continue to see momentum to the downside from here, we could see this market drop down to the 1.32 level rather easily. There's probably a bit of an“air pocket” underneath here. The size of the candlestick is rather impressive, and it does suggest that there's more to go. After all, this pair does not typically move 2% in a single day.
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Pay close attention to the WTI market because it could lead the way as to where we go next. If oil continues to rise, and quite frankly it looks like it's getting ready to breakout, then it's very likely that we will see the Canadian dollar pick up momentum. Not only would this be an interesting short, I suspect that you could probably look at that CAD/JPY pair, and start buying over there as well. This has the added benefit of not only betting on oil going higher, but the Bank of Japan coming in and doing everything it can to keep interest rates down yet again.About to Enter a Corrective Phase Again
On the other hand, if we do rally from here, I think it best you are probably looking at a bit of consolidation, but technical analysts are certainly getting a look at this and scream“head and shoulders pattern.” That pattern measures for a move down to roughly 1.31 or so, which is right around where the 200-day is. Because of this, I do think this is probably the one place where I might be somewhat comfortable shorting the greenback, even though Canada has a whole host of issues, not the least of which would be the housing market suddenly looking wobbly to say the least.
Either way, unlike the Euro which closed at the very top of the range, this market had hometown traders pushing it lower at the close, meaning that there was real conviction here. Ultimately, I don't think the trend has changed, I just think that we are getting ready to enter a corrective phase again, which is perfectly normal, and of course expected as the US dollar has been on fire.
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