The USD/CAD pair fell initially during the day on Tuesday but found enough support below the 1.45 level to turn things back around and form a bit of a hammer. The hammer of course is a very bullish sign, and as a result it looks as if the market will continue to try to go higher. This is interesting to us, because we do have a significant amount of volatility coming today as the Bank of Canada will release an interest rate statement, and more importantly a press conference and statement later.
At this point in time, we believe the pullbacks will continue to be buying opportunities as the US dollar is without a doubt the strongest currency in the Forex markets. With that, we look at any knee-jerk reaction coming from the interest-rate announcement as potential value that we can pick up in the US dollar. On top of that, the oil markets continue to struggle overall, and as a result there should be continued pressure on the Canadian dollar in general.
At this point, we believe that the market should try to reach towards the 1.50 level given enough time, so having said that we believe that every time this market dips, the buyers should return to this market going forward. We believe that the 1.40 level is essentially the “floor” in this market, and as a result we have no interest whatsoever in selling until get below that level, something that does not look very likely at this point. Beyond that, the support should extend all the way to the 1.38 level below there.
Honestly, we would love to see a negative move in this market due to the announcement or the statement, as it would allow us to pick up value in the greenback. There’s nothing on the horizon that looks bullish for oil, so therefore we believe that the Canadian dollar will continue to be the “punching bag” of the Forex markets going forward, at least for the foreseeable future as we still have plenty of supply in petroleum storage.