The USD/CAD pair fell during the session on Thursday, slicing through the 1.03 level. However, we did bounce a little bit so one has to wonder whether or not there is support down here that's willing to put up a fight. That does look to be the case, but as we go into the trading session on Friday, I am a bit cautious about trying to short this market, or quite frankly buy it. Although this is an area that I would think we could get a bit of a bounce, the fact that the FMOC member Evans said during the session that he believed the Federal Reserve would have to pour over several more months’ worth of data before deciding on tapering off of quantitative easing, really puts a dent into the value of the dollar.
Remember, the Canadian dollar is a commodity currency
You have to keep in mind that the Canadian dollar is a commodity currency. Not only did the Canadians export crude oil, but they also export a lot of minerals, gold included. That being the case, I believe that this pair really could break down given half a chance, but we need to get below the 1.0250 level on a daily close in order for me to feel comfortable shorting it. The other possibility is that a rally appears, and we continue to fail near the 1.04 handle, but right now I have a hard time believing that we are going to get enough of a push higher to even test that area in the near term.
If we do break down below the 1.0250 handle, I believe that it's very possible that we hit parity. I recognize the fact that the 1.0150 level has offered support in the past, but if it is now assumed that the Federal Reserve cannot taper anytime soon, this changes things. With that somewhat bit of certainty in the marketplace, traders will feel very comfortable selling the US dollar going forward, and thereby push it much lower in this market. Buying is going to be almost impossible in the near term.
