The US dollar initially tried to rally against the Canadian dollar, but then pulled back rather drastically. However, later in the day we are starting to see the market rally again, and it looks like we are going to continue the uptrend overall. Ultimately, I believe that the market has turned around and change the overall trend, so it remains a “buy on the dips” scenario. We had recently seen a bond trade favoring Canada, but that is becoming unwound, and that sends money back into the United States. Ultimately, this is a market that will be bumpy from time to time, but I believe that the gauntlet has been thrown down, and that the Canadian dollar is going to continue to get softer in the future.
I believe that we can continue to buy dips, and I think that the longer-term target is closer to the 1.30 level above. I also believe that we break above there, but obviously there will probably be a significant amount of resistance above, and a significant pullback could happen. However, this is very likely to be value that people will be willing to take advantage of. The Federal Reserve looks likely to raise interest rates at least a couple of times over the next several months, and that should continue to favor the US dollar of the Canadian dollar. I think that the Canadian central bank is going to have more issues tightening monetary policy than the Americans well. Ultimately, this is a market that should continue to see buyers over time, so a little bit of patience may help. I have been slowly adding on the way higher over the last several sessions. Selling isn’t a thought into we break below the 1.25 level, which looks very unlikely to happen.
Written by FX Empire