The USD/CAD pair went back and forth during the course of the day on Tuesday, forming a rather neutral candle. However, the market is most certainly in an uptrend and any pullback at this point in time should be looked at as potential value in the US dollar. With the FOMC Statement coming out later today, it is likely that we’ll see quite a bit of volatility in this pair. The 1.35 level below is support as far as we can see, and we essentially think of it as the “floor” in this market right now. We buy pullbacks, and of course breakouts to the upside as we believe this market will continue to go to the 1.40 level.
Ultimately, we believe that the support at the 1.35 level extends down to the 1.3350 handle or so, so this point in time any time we approached that area more than likely we will continue to see buyers. This could be in reaction to the FOMC statement later today, which could produce quite a few fireworks. This is normally the case, but ultimately the overall trend tends to win out, especially considering what has been so strong.
With the oil markets being so soft, it’s very likely that this market will continue to go higher over the longer term anyway. The Canadian economy isn’t anywhere near warranting any type of interest-rate, while the Federal Reserve it will more than likely raise interest rates today. The real question is whether or not they will continue to do so, and that will be parsed out of the statement.
Any selloff at this point time has to be thought of as the US dollar going on sale, and because of that we have to look at those as prime buying opportunities. In fact, we have no interest in selling this pair until we get well below the 1.3250 level, which would be a significant change in momentum and certainly show that the buyers are giving up. However, we recognize that the market breaking down from here is a very unlikely scenario.