The USD/CAD pair initially fell during the session on Thursday, but as you can see ended up grinding higher by the end of the day. We have now clear the 1.24 level, which of course is a good sign, and as a result I don’t see anything stopping this market from grinding to the 1.25 region. I have been calling for that level for some time and of course the Bank of Canada and its rate cut during the session on Wednesday has helped. But let’s face it, there’s not a whole lot going for the Canadian dollar at the moment as the oil markets continue to look very soft.
I believe that the 1.20 level is essentially the floor in this market right now, but quite frankly I would be surprised to see that level tested. Can we break through the 1.25 level immediately? Of course we can, but I would also anticipate some type of reaction and perhaps a pullback from there. Having said that though, the fact that we are forming a hammer at the top of the uptrend for the session on Thursday is not lost on me, and I believe it shows that there is a significant amount of underlying bullish pressure still.
Oil markets, interest-rate, and a stronger than the rest of the world US economy.
They are just simply is nothing to push the Canadian dollar higher at this point. The oil markets are soft, so that drives down demand for the Canadian dollar, the interest-rate differential has in fact shrank, so that doesn’t work in the Canadian dollar’s favor as much, and then of course the US economy is performing better than most other economies around the world. Because of this, it does in fact appear that we are not only going to hit the 1.25 level, binds be in a situation where we can buy the dips going forward. I believe that this pair goes much higher, and in fact they don’t even have a target at this point because we are moving so quickly. This pair tends to grind sideways for long periods of time, and then make sudden and impulsive moves. I think we are in the middle of one.
