The USD/ CAD pair initially fell during Tuesday trading, only to turn around and bounce. The 1.0150 level looks like it’s trying to be supportive again, and there is the possibility that we are simply just bouncing up to stay within a down trending channel. However it cannot be ignored that the reason area could be a consolidation rectangle as well with a false breakout, and this of course would be very bullish. We tend to believe the latter of the two instances.
This is predicated upon poor jobs numbers of the United States, Europe going into recession, and Asia slowing down. All of this equates to less demand for petroleum, and this of course is Canada’s biggest export. With this being said, we like bombing on a break of the Tuesday highs in order to test the 1.0350 level, and possibly higher. If we can break the 1.0350 level, we think that the 1.04 and then 1.10 levels are likely to be targeted by larger money orders. As for selling, we only do it on a break of the recent lows. This of course should lead us back down to parity.
Written by FX Empire