The US dollar went sideways initially against the Canadian dollar, but then exploded to the upside as the crude oil markets continue to build inventory. This currency of course is a proxy for the petroleum markets, and beyond that the Bank of Canada looks likely to remain on hold for some time. With this, we have somewhat of a perfect storm for the pair to continue to rally. I think that the market will eventually go looking towards the 1.30 level above, which of course is a large, round, psychologically significant number. Pullbacks should be thought of as buying opportunities, and I think that the 1.25 level underneath is massive support. I think that the impulsive candle on the hourly chart shows just how much sentiment is starting to favor the US dollar of the Canadian dollar, and I think that will continue to be the case longer term.
The 1.25 level underneath is essentially what I think of as the “floor” in the market, and I also believe that if we stay above there, the uptrend is still very certainly intact. The market should see pullbacks occasionally, but those should be thought of as value. After all, the Canadian dollar is taken a bashing in general, and the US dollar is one of the favorite currencies right now as the Federal Reserve looks likely to raise interest rates several times soon. There is an uptrend line on the longer-term charts that we are following, and it looks as if we will continue to see this uptrend intact as the recent selloff in this pair is over with now, as the bond markets have calmed down and the recent negativity has been completely repudiated at this point. Also, we broke out and above where the market fell from the surprise interest rate hike coming out of Ottawa.
Written by FX Empire