The USD/CAD pair broke higher during the course of the session on Tuesday, clearing the most recent high that this market has made. Because of that, the market touched the 1.13 level, and looks very bullish all of a sudden. Short-term pullbacks should offer buying opportunities as the Canadian dollar continues to soften, and let’s be honest: the oil markets certainly are doing no favors for the Canadian dollar either.
At the 1.12 level we would expect to see support again, and certainly would expect to see that the 1.11 handle. The market should continue to go higher over the longer term, and we still anticipate seen a move to the 1.15 level given enough time. At some of that, commodity markets in general are fairly soft, and the Canadian dollar albeit more or less influenced by oil, is influenced by other commodity markets as well. Because of that, it’s very likely that the commodity dollars in general should remain fairly soft going forward, as the US dollar remains the most important currency in the marketplace currently.
It’s very difficult to imagine a scenario where the Canadian dollar simply strengthens, at least against the greenback. Because of that, if we do see a bit of stagnation in this pair, you may wish to look for trades in other markets involving the Canadian dollar. After all, the other currencies around the world are also suffering against the US dollar, but the Canadian dollar does have the benefit of being a North American currency, and that of course has a bit of a knock on effect going forward.
This pair has a long history of grinding sideways due to the fact that the two economies are so intertwined, but impulsive moves to happen. In fact, the candle from the Tuesday session is probably just that, the beginning of an impulsive move higher. We have no scenario in which we are willing to sell this market at the moment, so having said that we continue to buy on the dips, as we head towards the 1.15 handle.
