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USD/CAD Forecast: Breaks Above 50-Day EMA Against CAD

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

The next move is probably going to be predicated on the oil markets, which are at extreme lows. 

  • The USD/CAD has rallied significantly during the trading session on Monday to break above the 50-Day EMA and threaten the 1.35 level.
  • Quite frankly, this is a market that is moving based on oil more than anything else, and we are seeing a lot of weakness in the oil sector right now.
  • If demand is going to remain weak, it’s very possible that traders will focus on that part of the equation.
  • In that environment, I would anticipate the Canadian dollar struggling going forward, as most Forex traders use the Canadian dollar as a proxy for their oil trading.

If we break above the 1.36 level, is very likely that the Canadian dollar continues to crumble, but it’s probably worth noting that we are testing the neckline of the head and shoulders pattern that we had been involved in, so it does make a certain amount of sense that there would be “market memory” in this general vicinity. On top of that, the 1.35 level he is a large, round, psychologically significant figure so that always causes a little bit of noise.

Pay Attention to the Oil Markets

The size of the candlestick is somewhat impressive, but it’s not extraordinary. I think this is a simple pullback to support at the 1.32 level, and then a bounce to the next potential resistance barrier. The next move is probably going to be predicated on the oil markets, which are at extreme lows. In this environment, if oil really starts to lose it, we could see this market take off. Furthermore, the US dollar has turned around quite nicely in general during the trading session, so there’s also the possibility that we just see a general US dollar rally as well. In that environment, we will probably try to get back to the 1.40 level.

Canada is during a housing issue, so it’ll be interesting to see how long it takes the Bank of Canada to turn away from a tightening policy. So far, they have been raising rates, but they raised rates less than anticipated the last time, much like Australia. Because of this, one must wonder whether commodities are going to continue to get hammered. Maybe there’s something the central bank sees that we don’t? At this juncture, I’m looking at the 1.36 level as a major breach of resistance. Otherwise, I would expect a short-term pullback.

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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