The USD/CAD pair broke higher during the course of the day on Tuesday, clearing the 1.32 handle. The impulsive candle is based upon not only the US dollar strengthening in general, but the fact that the oil markets broke down during the day, slicing through the last vestiges of support. This of course has a negative effect on the value the Canadian dollar, so looks like we are ready to continue the longer-term uptrend that we’ve seen for some time. We still believe that this pair has a wild ago, and that it is going to reach back towards the 1.3450 level again, and then far above there going forward.
Don’t get us wrong, this pair does tend to have quite a bit of a choppy nature to it, mainly because the two economies are so heavily intertwined. After all, the Canadians send 85% of their exports into the United States. With that being said, the economies are somewhat interchangeable. Ultimately though, it does look like oil is going to continue to struggle and with that it will decrease the demand for the Canadian dollar overall. Keep in mind that a lot of people use the Canadian dollar as the proxy for that particular market.
We think that pullbacks continue to offer support and with the FOMC Statement coming out during the day, it’s likely that we could see a bit of volatility. At this point time though, we hope there is a pullback that we can take advantage of. We see a significant amount of support all the way down to the 1.30 level at the very least, it’s not even lower than they are. After all, we have recently remarked on the fact that there is a supportive region from the 1.30 level all the way down to the 1.28 handle. With that being the case, we think it will take something extraordinary break of the uptrend. That’s not to say that it will be easy trading, you will almost have to trade this from a longer-term perspective at this point in time.