The USD/CAD pair drifted a bit lower during the day on Tuesday, as we are trying to make a fresh, new low. Ultimately, I think that it’s only a matter of time before sellers come back into this market based upon the Canadian economy outperforming the US economy. Interest rates in Canada are going higher much quicker than they are in the United States based upon market expectations, so this pair should continue to go lower. We have broken below an uptrend line on the weekly chart recently, and that is a very bullish sign for the Canadian dollar.
Because of the breakdown, I believe that the market is probably going to go down to the 1.20 below. On the longer-term charts, the 1.20 level looks to be very important, so I would not be surprised if we bounced from there. However, this market has completely broken down over the last several weeks, and I don’t see a change coming anytime soon. I sell rallies, I have no interest in buying, least not until we were to break above the 1.2550 level, as it would be a significant clearance of a large, round, psychologically significant number.
Oil markets could be a factor in this market as well, but I believe that ultimately the Canadian dollar will continue to gain even if the oil markets to roll over. Those moves could offer rallies to be sold in this currency pair, so I think that we could have a nice trading environment for those who are willing to jump in and out and follow the trade according to the trend. It’s likely that we may have quite a bit of distance to cover on this chart. As traders come back from the summer holiday, it’s likely that we will see a continuation.
Written by FX Empire