The U.S. dollar is surging. We saw impressive moves all over the forex market on Thursday and with the big slide in stocks, more is likely on the way. If not through the holiday season, we will be seeing it in the New Year.

The euro and pound sterling have already broken down and USD/JPY has had a huge rebound. AUD/USD has fallen below support as well.

One chart stands out as particularily tranquil — USD/CAD.

When we see a chart like this in a volatile market, we get excited. There is a well-defined range from 1.04 to 1.0750 that has been well-established since early November. We have been watching this range trade unfold and wondering which way it would break.

Now, the clear indication is that it’s going to break on the upside. We see a strong series of higher lows and we are brushing right up against the top of the range. All around we see USD strength. Also hurting the Canadian dollar are slides in oil, gold and other commodities.

At the moment, the picture is very clearly bullish. A breakout through the top of the range would immediately target 1.0850 but 1.11 would be a more-likely result.

But wait, we are approaching the holidays and liquidity is going to dry up very quickly. The U.S. bulls may decide to take a break. If so, Thursday’s failure to break above 1.0750 will be seen as a definite sell signal. In that case, we could easily see USD/CAD falling back to 1.04, or lower.

Taking a look at the short-term intraday chart gives us reason to think that’s exactly what might be coming.

What we see here is a 15-minute chart that has reversed mightily after hitting resistance. The line coming in at 1.0636 is the 61.8% retracement of the push to 1.0750. A fall below there would likely mean a defeat of the attempt to break the range on the upside.

Overall, the picture remains bullish for the U.S. dollar and a break through the upside of the chart is the most favoured scenario. Oil and stocks both look vulnerable and further weakness in those two would almost certainly end the range trade to the upside.

In the meantime, keep a close eye on this chart and be prepared for a powerful move. It has happened everywhere else, and it’s bound to happen in USD/CAD too.