USD/CAD fell on Thursday as oil markets regained some of the losses they suffered on Wednesday. The pair fell back down to the 1.03 levels, and area that we hoped to find support. The level has held up fairly well, and a bounce has been seen on the lower time frames. The breaking above the 1.03 signified real strength in the bullish bias in this pair on Tuesday.
The oil markets will more than likely be plagued by the weakening economic outlook for much of the industrialized world. The Canadian dollar will continue to suffer as long as there is serious threat of global recession, and lower demand that comes with it. The Chinese economy, one that has been so strong in its needs for crude oil, is currently slowing down as well – and this could spell out lower oil prices.
The rising Dollar is a trend that we expect in general as all commodities should be viewed with suspicion at the moment. The situation in Europe simply applies too much upward pressure on the safe haven currencies, and the Dollar is chief amongst them. The strength of the pair isn’t going to necessarily have anything to do with expectations of Canada, rather a rush to the safety of US Treasures and other “safe assets” in the United States.
The pair will struggle against the 1.05 resistance area, but overall looks up to the task. The braking of that level will lead to 1.07, and in turn that area could lead to 1.10 before it is all said and done. This pair likes to grind for some time, and then suddenly run hard in one direction or another. Because of this, it is very difficult to say when these moves will happen, but they do look very likely.
The downside looks fairly well protected by both 1.03 and parity, and given a choice – we are more comfortable buying at this point. In fact, we are presently buying dips as long as we are above the 1.03 level, and even as low as parity.
Written by FX Empire