The USD/CAD pair initially fell during the course of the session on Thursday, but as you can see found enough support at the 1.26 level to turn things back around and form a hammer. This hammer of course suggests that there is still plenty of buying pressure underneath, and as a result we remain bullish. The fact that we found support at the 1.26 level again also suggests that the buyers are very interested in this pair at that level and should continue to enter again and again. Because of this, we look at short-term pullbacks as potential buying opportunities in a market that has been so bullish for so long. Granted, recently we see no bit of consolidation, but quite frankly with the way the oil markets are behaving it’s almost impossible to imagine selling this pair as the Canadian dollar is so greatly influenced by the value of oil.
Recently, the Bank of Canada cut interest rates, and what was a surprising move. This of course is very negative for the currency, and the fact that the US dollar is favored by most currency traders around the world and even more pressure to the upside. Ultimately, the Federal Reserve is looking to leave all hands of quantitative easing behind, and will more than likely have to raise interest rates much quicker than the Canadians will, and that of course is what pushes the value of this currency pair higher.
Nonetheless, when we look at the longer-term charts we recognize that the 1.30 level was where we stopped after the financial crisis, so we recognize that the area offering resistance several times in a row suggests that the region will be hard to break above. Ultimately though, we think we are going to break above there, and that should turn this into a buy-and-hold type of marketplace. Until then, we look to go long on short-term dips as they will represent value in what is by far the most favored currency at the moment, and it is against a commodity currency, which of course are all falling out-of-favor.
