The US dollar fell slightly against the Canadian dollar during the Monday session, but as we are in an area that has been supportive in the past, one has to think whether we are starting to see support again, and if we can break above the 1.2733 level sends this market to the upside, perhaps reaching the 1.2870 level. Alternately, if we break down below the 1.2650 level for a couple of hours, that could send this market looking for the 1.25 handle underneath. That of course would be a negative sign, but I think that the 1.25 level is probably even more supportive than the area that we find ourselves in.
The crude oil markets of course will always have their influence on the Canadian dollar, but I believe that the noise in the market will continue to be very difficult, and that of course will have its influence. Because of that, I would expect a lot of sudden moves, but that’s not uncommon in this pair as the economies are so intertwined. Beyond that, I’m keeping an eye on the Greater Toronto Area, and the housing bubble that is basically out of control at this point. That will eventually work against the Canadian dollar, but so far it seems like most of the damage has been contained.
The massive selloff during the Friday session is probably a bit overdone, but it’s not until we break out above the 1.2733 level that I am confident enough to start buying as the market could turn around very quickly. If we do manage to break down below the 1.25 handle, the market probably makes a beeline for the 1.20 level.
Written by FX Empire