The USD/CAD pair went back and forth on Monday, but essentially ended up unchanged. There is a significant uptrend line just below though, and as a result we feel that this market could in fact buying quite a bit of buying underneath. If we break the top of the range for the session on Monday, we are in fact buyers as we feel that a move to the 1.08 level would more than likely happen at that point in time. That area could bring in the sellers, but if we can get above that level, we feel that this market could go as high as the 1.09 level. On the other hand, if we break down below the 1.06 level, we feel that this market could break down rather significantly. That move could in fact that all the way down to the parity level, as there isn’t much in the way of support between here and there.
The oil markets do look rather strong recently, and that typically does move in the favor of the Canadian dollar in general. This Canadian dollar and oil correlation is a longer-term correlation, but sometimes it can deviate. On top of that, keep in mind that the United States is starting produce a lot of its own oil, which can have a massive change to the underlying factors in this market place going forward.
The real question is going to come down to interest rates in our opinion. After all, the Federal Reserve now has to deal with a weaker than anticipated GDP number, which of course does not help the situation at all. The market has recently had a significant move, and you have to look at the longer-term uptrend as a sign that the market could in fact be going higher of the longer-term as well. However, this trend line needs the hold in our opinion for the market to have truly turned around, and if it does we think that perhaps the downtrend has finally been reversed after several years. This is a very interesting area for this market, and as a result we will be watching closely.
