The US dollar went sideways initially during the trading session on Friday, but then dropped towards the 1.28 level underneath. That level offered enough support to turn things around and cause a bounce, and we have now gone positive for the trading session. I believe that the US dollar continues to strengthen against the Canadian dollar, and for several different reasons. Not only do we have the higher interest rates coming in the United States, and of course the strengthening economy, the crude oil markets are starting to struggle again, and that’s always bad for the Canadian dollar. Beyond that, we have a housing crisis getting ready to happen in Canada, as we have been in a bubble for some time.
The Bank of Canada was cautious during the week during its interest rate statement, and that of course is very negative for the Loonie as well. All things being equal, I think if the Federal Reserve sounds even remotely hawkish during his statement this month, that should supercharge this pair to go much higher. That doesn’t mean that is going to be easy, but I do believe that the longer-term attitude of the market continues to be very bullish, so I look at pullbacks as value, and not selling opportunities as we have seen the market be very willing to start buying on these dips. I believe there is a “floor” in this pair near the 1.27 level, so it’s not until we break down below there significantly that I would be concerned with the bullish attitude. A break above the 1.30 level should send this market much higher for the longer-term.
Written by FX Empire