The USD/CAD pair broke down during the course of the session on Tuesday, breaking below the 1.30 level slightly. However, there is a lot of support just below so it’s very likely that the market could find buyers. Also, we get a Canadian interest-rate announcement today, and that of course can have a massive effect on this market. Quite frankly, I believe that we do bounce given enough time, as the Bank of Canada will more than likely be more dovish than hawkish. Also, oil markets have been struggling lately and could continue to weigh upon the Canadian dollar.
On top of that, we get the Crude Oil Inventories announcement coming out of the United States, and that of course can heavily influence the oil markets. The oil markets of course heavily influence Canadian dollar so we could have a bit of a “double whammy” in this market. After all, if the Bank of Canada sounds extraordinarily dovish, and the oil markets show that demand is falling for crude oil, it’s likely that Forex traders will absolutely pummel the Canadian dollar in reaction. On top of that, there could be a bit of a jump into the US dollar as a form of safety trading also, so be aware the fact that this market could be very violent during the day.
Once we break above the 1.32 level, that would be an extraordinarily strong signal, maybe entering a longer-term “buy-and-hold“ type of move waiting to happen in a market that has been fairly bullish lately and tends to be very choppy over the longer term but will have sudden moves in one direction or the other. Keep in mind, we need to get both announcements to see what the total reaction will be, and they are a couple of hours apart. However, I suspect that a lot of what’s going on during the day on Tuesday will be simple position squaring as people don’t want to be in the market ahead of what could move this market over the next couple months.