- In my daily analysis of major currency pairs, the USD/CAD continues to capture my attention as the political issues in Canada take front and center stage.
- With Justin Trudeau refusing to step down, we are setting up a potential political crisis in the Great White North, which is one of the major reasons we are seeing the Canadian dollar fall apart.
- Remember, Canada is the only G-10 country with no gold reserves. This is a decision that I think someday will truly be regretted in Ottawa.
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Technical Analysis
The technical analysis for this pair is obviously very bullish as the US dollar continues to destroy its Northern neighbor. That being said, we do have an interest rate decision coming out of Washington DC at the end of the day on Wednesday that will certainly cause a bit of volatility. The Federal Reserve is expected to cut interest rates by 25 basis points, so there might be a knee-jerk reaction to the downside. That being said, it will be short-lived, and I would be very interested in buying this pair on that dip.
The 1.46 level above is an area worth watching due to the fact that it has been important more than once. The market breaking above that level could kick off a bigger move, and with CPI coming out during the day on Tuesday in Canada, I found it interesting that even though it was hotter than anticipated, nobody seemed to care. However, make no mistake here: the USD/CAD pair is still very bullish, and I think that any chance you get an opportunity to pick up “cheap US dollars”, you have to be thinking along the lines of doing so. Shorting this pair at this point in time would be an absolute disaster just waiting to happen.
If Justin Trudeau leaves office, that could be the beginning of the stabilization of the Loonie, but Canada has a long way to go. Another thing that could help is that oil should strengthen next year, but as far as strengthening against the US dollar, that would be a much bigger fight than other currency such as the Euro or perhaps even the Australian dollar.
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