The US dollar fell against the Canadian dollar again during the session on Wednesday, breaking below the 1.32 level. However, there are a lot of concerns when it comes to betting against the US dollar when it involves the Canadian dollar. Yes, there are reasons to think that the Canadian dollar could rally, but right now it’s only speculation that the Bank of Canada is looking to tighten interest rates or at least taper off quantitative easing. I believe that the market is paying attention to several different things at once. Obviously, oil has an effect on the Canadian dollar, so if oil tanks, it would take a massive interest rate change and massive change in the behavior the Bank of Canada to continue to support the Loonie. I believe that the market should focus on not only the behavior of the central bank, but oil as it always does. And quite frankly, oil looks absolutely horrible.
Obviously, whatever the Federal Reserve will do late during the Wednesday session will have an effect on this market, but we have sold off so much over the last couple of days, that I think there is more of a possibility of surprising bullishness in this market than bearishness. We have already lost almost 3 handles, which is a strong move over the last three days. Even if we felt here, I believe that selling the US dollar against other currencies would make more sense. If the Federal Reserve suddenly surprises the market and suggests that it is still going to raise interest rates later this year, this market will absolutely explode to the upside, right along with the USD/JPY pair.
Written by FX Empire