USD/CAD Daily Outlook July 9, 2012

Christopher Lewis

USD/CAD surged on Friday as the" risk off trade" came back into play. The oil markets got slammed on Friday, so naturally the Canadian dollar suffered as well. This is predicated on not only a lack of demand worldwide for crude oil, but the fact that the US labor market is stalling suggests that there will be less demand out of the United States as well.

Money has been flying into the US treasury markets as we see lower and lower yields, and this of course requires traders to convert their currencies in the US dollars. Essentially, the Dollar is up against almost everything. With this being said, the Canadian dollar won't be any different although it is somewhat shielded from the trouble when Europe by virtue of being a North American currency.

The breaking below of the 1.0150 level was a significantly bearish move, but in the end we saw this pair bounce in reaction to the lower oil prices. Also of concern will be the slowing global economy, which of course should continue to exacerbate the demand issue with light sweet crude. As long as that's the case, the Canadian dollar will continue to suffer.

1.0150

Since the 1.0150 level gave way, I was prepared to short the spirit going down to the parity level. However, with this rebound I believe that befall the parity is the least likely scenario to happen in the short term. On a break of the highs from the middle of the week, I believe that this pair races back up to the 1.0350 level. This is predicated on a weekly hammer that has formed and this would in fact be a trigger for buying off of the candlestick.

USDCAD Daily 7912

The 1.0350 level should be fairly resistive, but if it gives way I think this pair goes as high as 1.05 in the short term. Once that gives way - this pair could continue much higher. In fact, with all the global risks out there I believe that this will eventually be the way forward. Any selling than I do of this currency pair, will certainly be of the short-term variety.

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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