The USD/CAD pair broke down during the day on Wednesday, and even broke below the 200 day exponential moving average. This should bring in long-term traders to the downside, but I am going to wait to see whether or not we can break down below the range for Wednesday in order to start selling. I will say this though, the US Dollar Index is starting to look very soft at the moment, and that of course should drive down the value of the US dollar overall.
Pay attention to the oil markets, as they of course are very influential when it comes to the Canadian dollar. The pullback a little bit during the session on Wednesday, but quite frankly I think that they are getting ready to break out to the upside for a significant move higher. That should drive up the value of the Canadian dollar in general, and as a result I think this pair probably goes back down to the 1.18 level in the short-term, which of course is the 50% Fibonacci retracement from the move higher from several months ago.
Selling rallies that show weakness
[CAD:FXAcademy CTA #73]I thought that the US dollar would try to find some type of support here, but it is clearly failing. Because of that, I am now going to sell short-term rallies every time they look like they are getting a little bit soft. I’m not expecting any type of meltdown here, but I am expecting this pair to grind lower. Once we get below the 1.18 level, I don’t really think that it would take too much to push this pair down to the 1.16 handle next. There is a cluster there that should offer support, but it will probably be of the shorter-term variety, meaning that the 1.15 level would be next.
I would however get bullish of this pair again if we could rise above the 1.22 handle. I don’t think it’s going to happen, but you always have to keep an open mind and have a “Plan B” in case the market doesn’t do what you anticipate seeing.
