The USD/CAD pair fell slightly during the day on Tuesday to continue the overall downward trend. We did bounce later in the day, but I think that there is going to be a certain amount of resistance near the 1.27 level now, so I’m waiting to see and exhaustive candle that I can start selling. This will be especially true if oil markets rally after the Crude Oil Inventories announcement, but in the meantime, I look at this as a simple value proposition in the Canadian dollar. I have no interest in buying into we break above the 1.28 handle, which seems to be very unlikely. Ultimately, this is a market that has broken down significantly in the recent past, mainly because of the Bank of Canada raising interest rates.
The bond trade
The bond trade continues to be main driver of currency seems to be buying Canadian bonds, law shorting US bonds. As long as that’s the case, this market should continue to go much lower, perhaps driving down to the 1.25 handle, and then possibly down to the 1.24 level underneath. Ultimately, this is a market that is a “sell rallies” situation, and that is how I look at this marketplace, as one that cannot be bought. Markets continue to be negative overall, and quite frankly I don’t see anything is going to change his anytime soon, unless of course the oil market collapses. That might be the one caveat in this market, so looking at this chart, I believe that if you are patient enough you should be able to find plenty of selling opportunities. I have no idea where the bottom is, but I don’t think we are near it currently, and that we have much farther to go to the downside.
Written by FX Empire