USD/CAD Forecast June 13, 2012, Technical Analysis

The USD/CAD pair fell during the session on Tuesday as the oil markets bounced slightly, giving some hope to the Canadian dollar bulls. The pair has been in a nice uptrend lately, but found a lot of resistance at the 1.04 level. At this point in time, it is difficult to see a sudden massive swing in demand for oil, so the Loonie could continue to soften over time. However, the markets don’t have to move on anything in particular, so technical analysis must be respected.

The most recent action seems to be centered between the 1.03 and 1.02 levels, and the consolidation continues to control the markets. The overall action lately has been to the upside, and although the oil markets got a bit of a bounce, the fact is that the market in that commodity just looks weak to say the least. The Canadian dollar will continue to suffer as a result, and bad headlines from around the world – especially Europe – will continue to weigh upon the pair. The downside is probably limited form here, and as a result we still prefer the “safety trade”, or in other words buy the Dollar.

Granted, timing is certainly important, and as this pair is tightening up, we fell a breakout would be a good trade signal. A break above the 1.03 level would send this market looking for 1.04, and then almost certainly the 1.05 level. The brake down of the pair below the 1.03 level would likely run into supportive action every handle below it until we cleared the 0.99 level. Because of this, it simply looks like an easier trade to buy this pair on bad news.

The demand for oil is still weak, and the industrial demand for just about everything is slowing down at the moment. As long as this is true, it is hard to think that this pair will fall too far. We like buying at the handles (numbers ending in “00”) on supportive daily candles as it shows that the uptrend is continuing in a logical manner.

USD/CAD Forecast June 13, 2012, Technical Analysis

Written by FX Empire