Looking at this chart, we have seen the market launch quite drastically to the upside, pull back a bit, find support at a big figure, and then continue the run higher.
The USD/CAD bounced during the trading session on Wednesday against the Canadian dollar at the crucial 1.35 level. This does make a certain amount of sense, because obviously there is a lot of psychology around these big figures, and of course, the US dollar has been like a wrecking ball against almost everything.
North of the border, the Canadian economy must deal with falling oil prices, although oil has recovered over the last couple of sessions. They also must deal with a housing bubble that starting to deflate, and a drag on the economy as a result. There is also inflation in Canada that is causing major issues, and quite frankly being a commodity currency is not a good thing now with the global economy slowing down. Looking at this chart, we have seen the market launch quite drastically to the upside, pull back a bit, find support at a big figure, and then continue the run higher. This is textbook stuff, and I do think that we will continue to see buyers on dips going forward.
Waiting for Buying Opportunities
- The 1.38 level above is a significant resistance barrier, and if we can clear that level, I think it opens the possibility of a move to the 1.40 level.
- Any breakdown from here could see a move below the 1.35 level signal a potential run down to the 50-Day EMA.
- I don’t necessarily think that happens, but it is something that we need to keep in the back of our minds. I do like the idea of buying dips and picking up value, and I do not have any interest in shortening this market.
OPEC is anticipated to announce a 2-million-barrel production cut per day, and while that could drive oil markets higher, I think that the Canadian dollar will probably remain somewhat muted in reaction, due to the various other factors going on in Canada now. I personally do not like the idea of shorting the US dollar, so therefore I have an upward bias in this market, but I do recognize that we will not necessarily be green every day. Looking for value and taking advantage of it is the best way to go going forward and I think we continue to see plenty of opportunities.