The USD/CAD pair broke down during the day on Tuesday, but we still think that there is plenty of support below that could turn this market back around. With this, supportive candle has us buying. However, you have to keep in mind that there is an interest rate announcement out of the Bank of Canada today, and that of course will have a lot of implications with this pair. Ultimately, we don’t suggest that this market is going to fall with any real conviction, because there so much in the way of support below.
We still believe that the 1.30 level below is support. It was an area that was massively resistive previously, and as a result it should now be massively supportive. Remember, the market crashed into this area during the financial crisis, and that of course offered the absolute ceiling in this market. With that being said, we believe that this market will continue to go higher and any pullback should be looked at as value in the greenback. We also believe that the support extends all the way to the 1.28 level, and as a result we really don’t have any scenario in which we are willing to sell as it is only a matter of time before the buyers come in.
The Canadian economy has been very soft lately, mainly because of the lack of pricing power in the petroleum markets. With this being the case, we don’t see any reason why this market would fall for any real length of time, not only from a technical standpoint but also a fundamental standpoint. Given enough time, we believe that this market should then head to the 1.35 level, and that of course is the next large, round, number.
All things being equal, we believe that this is a longer-term move to the upside. With this, we believe that every time this market pulls back it will be a buying opportunity given enough time. Any sign of support should be a call to start purchasing more US dollars. It is not until we break down below the 1.28 level that we would consider selling.