The USD/CAD pair initially fell on Wednesday but found enough support near the 1.2450 level to turn around and rally towards the 1.20 level. However, this is a market that is very choppy due to several factors moving it at the same time. For example, the Bank of Canada recently had an interest rate hike that was somewhat unexpected, and that of course put a lot of downward pressure on the pair. However, recent comments coming out of the Bank of Canada have suggested that the interest rate hikes are necessarily automatic, and therefore I think the market has calm down a bit after that move. Alternately, we have the Federal Reserve looking likely to cut back on its quantitative easing, and that has the bond markets coming into focus, as we once had a major discrepancy between interest rates of the 2 countries. Because of this, I think that we will continue to see a lot of choppiness and uncertainty, and that leads to be very difficult trading.
If we can break down below the 1.24 level, the market should continue to go much lower, perhaps reaching towards the 1.20 level as we had recently broken down below the bottom of an uptrend line. Alternately, if we make a fresh, new high, I think at that point the US dollar will continue to rally. Regardless what happens next, it’s going to be a very noisy and messy affair, and of course you must keep in mind that the oil markets will have their say as well. Because of this, it’s good to be very difficult but I think the market will eventually have some type of massive move that we can follow. Right now, it’s probably best to sit on the sidelines and wait for clarity.
Written by FX Empire