USD/CAD Daily Outlook June 12, 2012

Christopher Lewis

Looking at this pair lately, it has been a strong case for a global slowdown. True, the two economies are very interconnected, but the reality is that the Canadians need a much stronger economy than the Americans do, in the sense that the Canadians produce so many commodities. (The Americans do as well, but grains are a food and that’s a big difference.)

The oil markets have been falling hard over the last couple of sessions, and the Loonie will always suffer when this happens. The jobs picture in the United States is getting weaker, and this will certainly weigh upon the amount of commodities (read: oil) that the Americans are going to be importing from Canada. This of course will bring down the demand for the Canadian dollar.

The recent move has been pretty brutal to the upside, but this is just how the pair historically moves. There are long periods of nothing, and then suddenly a blast in one direction or another. There are a lot of traders out there that don’t like this pair, but I find it simply one that you need to be in tune with the longer term charts a bit more, and act upon breakouts that can be seen being set up on the higher time frames such as the weekly chart.

Gap filled and beyond

The gap form the open in Asian trading ended up being filled and much more. It should also be noted that the 1.02 level has acted as support in this pair, and the level is starting to look more and more important at this point. In fact, I think that a lot of buyers stepped in during the wee hours of Monday at that level specifically, based upon the massive reaction at that point.

USDCAD Daily 61212

The oil markets look horrible, and the $80 level is about to give way in the Light Sweet Crude markets. When that happens, there shouldn’t be much to keep this pair form breaking out and above the 1.05 level in my opinion. I am buying dips and that breakout if and when it comes.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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