Potential signal:
one of the most obvious signals in the Forex world for me right now is buying the USD/CAD pair on a daily close above the 1.40 level. I would have a stop loss at the 1.3880 level, and would be aiming for the 1.4250 level, perhaps even as high as 1.4315 above.
- During my daily analysis of major currency pairs around the world, the USD/CAD pair continues to capture a lot of attention for me, as we are pressing against a major resistance barrier that I think needs to be paid close attention to.
- With this in mind, we need to think about what this pair actually represents before we put money to work.
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Interconnected Economies
The US and Canadian economies are highly interconnected, and with that being the case it does tend to be a little bit more messy trading this pair than many others. Anybody who has been to the International Peace Bridge or the Ambassador Bridge can see just how much trade goes across the border. With this being the case, it does mean that there is a lot of commercial trade of US dollars and Canadian dollars, and therefore think you get a situation where things can get a bit noisy.
If the US economy starts to take off, that does help the Canadian economy over the longer term. However, there is going to be a period of negotiations between the Americans in the Canadians as far as trade agreements, which typically will favor the US, mainly just due to the size of the economy. It’ll be interesting to see how the Trump administration handles Canadian trade, because there are some things that he doesn’t like, but at the end of the day the United States and Canada have very strong relations, so it’s hard to imagine that it will disrupt the behavior of this pair.
Technical Analysis
The 1.3950 level has been an area of significant resistance, and I think that will continue to be the case. In fact, when you look at the longer-term charts you can even make an argument for this resistance barrier extending all the way to the 1.40 level, so it’s really not until we break above that level that we have actually broken out.
The 50 Day EMA is currently at the 1.3750 level and rallying to the upside, perhaps getting ready to hit the 1.38 level, an area that should be support on any pullback.
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