The USD/CAD pair rallied on Wednesday, crashing into the 1.30 level. A lot of this must do with the oil market rolling over, as the Russian suggested that they would not be willing to cut production, and that of course sent oil tumbling. However, there has been a trade that involves shorting US treasuries, and buying Canadian treasuries. This has helped money flow into Canada, and that could be part of what we are seeing here, traders betting on higher interest rates coming out of the BOC. Ultimately, it is not until we break above the 1.3050 level that I’m willing to buy. At that point, I would expect this market is go looking towards the 1.32 level above. Choppiness should continue to be the mainstay of this market, as the pair tends to do so anyway.
Downward pressure
If the downward pressure does continue, I would anticipate the market reaching down towards the 1.29 level underneath. A breakdown below there should send this market even lower, perhaps even down to the 1.28 handle. Short-term rallies are selling opportunities, and that being the case I think that the market will continue to favor these opportunities going to the downside. I don’t know how much farther we go though, because eventually the oil markets falling apart will work against the Canadian dollar. At this point, I believe this is more about bonds than anything else, and although that market is huge, a lot of the currency traders around the world will use the Canadian dollar as a proxy for crude. Short-term trading is probably the best way to look at this market, so therefore I think sell and sell again is probably what we will probably see going forward in the market over the next several sessions.
Written by FX Empire