The USD/CAD pair had a very rough session on Thursday, initially surging much higher, then pulling back drastically, only to bounce again to the highs, and then pulling back to show weakness yet again. This very violent trading seems to be indicative of a short-term trading range, with the 1.3650 level offering support, and the 1.3750 level offering resistance. Short-term trading is probably about as good as this gives, although longer-term we have seen more of an upward bias. The oil markets have rallied a bit, so it looks likely that the commodity markets will push the Canadian dollar round as per usual. I still believe that there are a lot of issues when it comes to Canada, not the least of which is Moody’s downgrading a lot of the Canadian banks as home loans are getting out of control.
Toronto is the microcosm
Last summer, one of the first things that I noticed in downtown Toronto and the surrounding 5 boroughs is that the construction is out of control. Candida currently finds itself in a housing bubble, at least in the province of Ontario, and that is starting to show signs of negativity in the economy. We are starting to see banks struggle a bit, and I think this will continue to weigh upon the Canadian dollar longer term. So, with that in the background, I believe that the longer-term bias is to the upside, but we need to see a technical signal to start buying. I think if we can close above the 1.37 level on a daily chart, it’s possible that might be the signal, or of course pullbacks that show signs of support on short-term charts. I believe this is an excellent currency pair to trade from the longer-term perspective, meaning that trading the small positions will probably continue to be the best way, and simply adding to your position going forward.
Written by FX Empire