The US dollar initially dipped lower against the Canadian dollar on Tuesday, but found enough support near the 1.2625 level to turn around and rally again. We have seen a significant move to the upside over the last couple of sessions, and it looks likely that we will continue to see buyers get involved. Currently, it looks as if the target is probably the 1.28 handle for the short term, and that it’s likely we have a “floor” in the market somewhere closer to the 1.25 handle. I also believe that the 1.28 level above is going to get broken given enough time, perhaps allowing the market to reach the 1.30 level longer term. We also should keep in mind that oil markets have been a bit noisy, so that will continue to cause issues in this pair as the Canadian dollar is so highly influenced by petroleum.
I like buying dips, and using short-term charts to do that. Eventually, if we can break above the 1.30 level that’s an extraordinarily bullish sign for the US dollar, and probably leads to more of a “buy-and-hold” scenario. That will probably be accompanied by US dollar strength against most other currencies around the world, and the Canadian dollar of course has recently seen a lot of noise come into the marketplace as this was originally due to the bond trade favoring Canada over the US, but that has completely turned around. The Bank of Canada suggested that interest rate hikes weren’t necessarily going to be “automatic”, and that of course suggests that perhaps the selling of the USD/CAD pair after the surprise interest rate hike was a bit overdone. Longer-term, looks as if the buyers are starting to come back into the picture. This pair does tend to trend for very long amounts of time, followed by choppiness as we have seen over the last couple of sessions.
Written by FX Empire