The USD/CAD pair initially was very flat on Tuesday, testing the 1.37 level for resistance. The oil markets were relatively quiet, but then turned around to start falling again. On top of that, Canadian Building Permits caused quite a bit of movement in the market, as the number was horrible. This being the case, the US dollar rallied against the Canadian dollar, breaking above the 1.37 level rather handily. The 1.3750 level offered a bit too much resistance for the market to continue going higher as I write this, but ultimately the impulsive move should be followed by buying pressure, as the market has been very bullish over the longer term. I think the given enough time, we will probably go looking towards the 1.38 handle above, which is where the selloff began a couple of days ago. Pay attention to the oil markets, they have a massive influence on this market, and if they start to selloff, this pair will rally even more drastically.
Potential support at the 1.37 handle
I believe the pullbacks will find buyers underneath, specially near the 1.37 handle. That is an area that had been resistance, so it makes sense that it would start offering support again. After all, it was supportive in the past as well. The longer-term is bullish, so I do not wish to fight that, and I think that the oil markets will continue to have a lot of issues. With the Crude Oil Inventories announcement coming out today, that could be fuel for the fire so to speak. Because of this, I look at pullbacks as buying opportunities based upon value, as the US dollar is certainly more favored over the Canadian dollar currently. With the potential housing crisis in Canada, this will only add more skepticism to the Loonie.
Written by FX Empire