USD/CAD Forecast: Continues to Rally

• The USD/CAD has rallied a bit during trading on Thursday, which is a simple continuation of the overall trend that we have seen against most currencies, including the Canadian dollar.
• The Canadian dollar is highly influenced by a lot of different things, not the least of which would be the oil market. We also must worry about the Toronto housing market, which is starting to fall apart, as well as other bubbles in the Canadian economy.
• Regardless, this is a market that I think will see a lot of US dollar strength.

The 1.37 level seems to be a little bit of a magnet for price, but the 1.38 level is even more important. If we can break above there, then it’s likely that the 1.40 level above could be a target. Short-term pullbacks offer the possibility of finding value in the greenback, now I think that it’s likely that we have a “buy on the dip” mantra going forward. The 1.34 level underneath could offer support going forward, and therefore a bounce from that area also makes it interesting.

CAD Rallies Likely to be Short-lived

The 50-Day EMA is sitting just above the 1.32 level, and it looks as if it is going to continue to race towards the upside. Given enough time, we could see a lot of volatility, but nonetheless, I think the trend is very much in Scott’s, and if the global economy is going to continue to struggle overall, it does make sense that we would see a lot of selling pressure on the Loonie, due to the fact that crude oil will continue to see the decline of demand, and that obviously drives down the value of a barrel.

Looking at the chart, I think we get a situation where if you get any type of pullback, you should see a certain amount of interest in going long, and selling now would be very difficult to do unless, of course, we see a major change in attitude or statements coming out of the Federal Reserve. This doesn’t mean that we can’t see the Canadian dollar strengthen from time to time, but it should all be short-lived. A break above the 1.40 level could kick off the next major leg higher in this pair, so recognize that it would matter.

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