The USD/CAD pair fell slightly during the course the day on Thursday, breaking the bottom of the shooting star that had formed on Wednesday. This of course is a very negative sign but there is the 1.25 level below which of course is a large, round, psychologically significant number. With this being the case, there could be quite a bit of support underneath, which could cause a bit of a bounce. Nonetheless though, it’s very likely that any bounce at this point in time should face exhaustion above, and should turn things back around to form a negative candle. At that point in time, we would be interested in selling this market as it should be a continuation of the longer-term downtrend.
Keep in mind that the oil markets have a massive influence on the Canadian dollar, and as such it is likely that the crude oil markets will be followed very intently by traders as it is starting to run into a significant amount of resistance, which could be another factor for a bounce here. However, the crude oil markets do look rather bullish over the longer term, so it’s likely that we will see continued of selling pressure.
Not only that, you have to keep in mind that we broke down below the uptrend line a while ago, and that of course was a very negative sign. Also, breaking below the 1.30 level was also significant so now it appears that the market is ready to continue driving lower. The next target would probably be the 1.23 level, and then possibly the 1.20 handle. This move has been rather drastic, and although it seems like longer-term cyclical issues will continue to plague the crude oil markets, the value of oil in the meantime looks to go higher.
The Federal Reserve of course has a part to play as well, and right now it appears that we will have less interest-rate hikes than originally thought. That of course continues to work against the value of the US dollar. Because of this, the downtrend should continue.
