The USD/CAD pair exploded to the upside as the Canadian trade deficit continues to expand. Ultimately, we broke above the 1.25 handle, and for me that’s a very bullish sign. Given enough time, the market should then continue to reach to much higher levels, perhaps the 1.30 level above. Now that we have broken above the 1.25 handle, it’s very likely that the market continues to see buyers in that general vicinity. This type of explosive move has a lot of people downing that the Bank of Canada is going to raise interest rates anytime soon again, and they of course did state recently that interest rate hikes should not be thought of as automatic.
Crude oil markets continue to be very noisy as well, so it’s likely that the Canadian dollar will continue to be tough to hang onto anyway. With this, I am a buyer on dips, I believe that we will eventually go looking towards the 1.2750 level, and then eventually the 1.30 level above. The market continues to be noisy and choppy, but longer-term I think that today could be a major milestone also, because we get employment figures from both countries. This could be a bit of a file signal as to which direction we are going, especially if the US jobs numbers continue to impress, while the Canadian jobs figures slot. That would be the “one-two punch” that we need to send this market much higher. If we get conflicting signals, that could drive this pair back down a bit, but I think we are starting to form a very significant base underneath to keep this market alive. The choppiness should continue, and perhaps even get worse. Because of this, you may wish to build your position slowly.
Written by FX Empire