The USD/CAD pair has been on a tear lately, and quite frankly I don’t see why it won’t continue. The market is an interesting one as the two economies are so interconnected, and therefore it has a few different nuances that other markets don’t have. For example, the Canadians send 85% of their exports to the United States, and as a result the market will react favorably towards the Loonie when things are good in America. That is at least the normal reaction.
The world is watching the Federal Reserve and its tapering possibilities. The jobs market will be the most important factor, so the non-farm payroll numbers and first time unemployment claims will be vital to the direction of the US dollar. The markets will react favorably to the Dollar when those numbers are good, mainly because they can garner the idea of tapering at that point.
Oil markets look weak at the moment.
The oil markets look weak at the moment, and as a result we could see the WTI market drift lower to the $90 handle. If it does, the Canadian dollar will depreciate along with it. I see this market as one that is ready to spring higher, and that would without a doubt give it a chance to. The Canadian dollar is highly sensitive to the WTI market, so keep an eye open on both.
The 1.06 level is vital, and at the time of writing, it looks ripe to fall to the buyers. If we get above there, I think that we will hit the 1.10 handle rather quickly. In fact, the thin volume during the month of December will more than likely only help facilitate this move, so it could happen rather quickly. At that level however, I think the sellers will step back into the market.
Keep in mind that this pair has a long history of going sideways for a while and then suddenly jumping in one direction or another in what can only be described as impulsive moves. Because of this, if we get that above mentioned breakout – I will buy immediately. Blink and you could miss the move.
