Can I create a link that has a merge field in it?

To keep the VerticalResponse tracking we apply in emails:
You can place merge fields within the query string (after the question mark "?" in a URL), either as the name or value field. But you cannot place the merge field before the query string.

This will work:
<a href="http://www.domain.com/index.html?email={EMAIL_ADDRESS}&fname={FIRST_NAME}">Domain</a>

But this will not work
<a href="{DOMAIN}/index.html">Domain</a>

If you are willing to turn off the VerticalResponse tracking, you can apply the merge fields anywhere:
<a href="nr_{URL}">click here</a>

OR merge part of the URL
<a href="nr_http://www.{domain_of_URL}">click here</a>

In Canvas,just click on the "link" icon and enter the nr_etc... in the field where you normally enter the URL.