- The USD/CAD initially tried to rally a bit during the trading session on Wednesday but has found more selling pressure as the downtrend continues.
- With this being the case, it looks like the 1.3320 level is now being threatened, and of course by extension, the 1.33 level.
- With this being said, I think the US dollar continues to struggle, and you should also keep in the back of your mind that the Canadian dollar is also influenced by the crude oil markets.
Crude oil and the CAD
The crude oil markets have been recovering as of late, so it ties quite nicely to this pair as the US dollar continues to struggle against a major petrocurrency. That being said, we also see the US dollar struggling because the Federal Reserve has moved its so-called “dock plot”, suggesting that interest rates are going to continue to drop in 2024. In that scenario, the market will likely continue to see downward pressure, and we could go looking to the 1.32 level over the next month or so.
That being said, keep in mind that the holiday season is upon us, and that will cause a certain amount of liquidity drain, and that of course means that the market is likely to see a lot of choppiness or perhaps even indecision over the next couple of sessions. However, it’s obvious that the US dollar has taken a major turn and now the one thing that could help the US dollar would be some type of major “risk off event” from a geopolitical standpoint. If we do get some type of major event, that does drive money back into the US dollar.
In general, this looks like a market that is going to continue to see a lot of selling pressure above, and I do think that it is probably only a matter of time before sellers come in and take advantage of any short-term rally, as the US dollar is now on its back foot against almost everything. Traders and investors alike will continue to look at the possibility of some type of monetary easing coming out of the Federal Reserve that will have a major influence on the currency markets in multiple pairs, including this one.
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