The US dollar fell again against the Canadian dollar during the session on Friday, as we reached towards the 1.25 handle. That’s an area that should cause a bit of support, but when you look at the hourly chart, you can see that clearly every time we rally, the sellers come back. In fact, I have drawn a nice descending channel in this market, and when I look at the longer-term charts the first major significant uptrend line isn’t until we get closer to the 1.24 handle. Because of this, I remain bearish in this market place.
If you been trading currencies for any length of time, you know that oil is a bit of an influence on the Canadian dollar, so if it rolls over significantly we could see a bounce. However, I think most of the bounce will come from the fact that the 1.25 level is such a large, round, psychologically significant number. I also believe that given enough time people will ignore that and we will go lower looking for the larger uptrend line. If we broke above the 1.26 handle though, I think at that point we could start to see bullish pressure coming into the market, and perhaps try to change the trend, albeit for the short term. There continues to be a great trade in the bond markets were people are buying Canadian in shorting American, and that continues to work against this currency pair overall.
Written by FX Empire