The US dollar plummeted against the Canadian dollar after the Bank of Canada raised interest rates for the first time in 7 years. This and the market slicing through the 1.28 level underneath, and it looks as if we are going to go looking towards the 1.26 level after that. Short-term rallies should offer selling opportunities, as although the Federal Reserve is likely to raise interest rates, it is likely to do it very slowly. Even though oil markets were less than impressive during the day, it appears that the Canadian dollar was focusing more on the interest rate differential situation the bond traders have been paying attention to for some time. As typical, the bond market had it right to begin with, and the currency markets are simply trying to play catch-up. I believe that this market will enter a protracted downtrend now.
I look at this is a market that you can sell rallies and, every time we show signs of exhaustion. The 1.26 level underneath will be the target, but quite frankly I think that the 1.25 level is probably a little bit more likely longer term. I think that the Canadian dollar will continue to accelerate, and if the oil markets can rally a bit, that will supercharge the Canadian dollar, and make this an even more explosive moved to the downside. It looks as if the market is a little bit more “risk on” these days, as stock markets are strong, and commodity markets in general are at least looking a bit healthier. The Canadian dollar should get a bit of help from that as well. Buying is in the thought unless of course the oil market completely collapses, which is something that I think although we could be bearish, I don’t think’s going to happen.
Written by FX Empire