The USD/CAD pair has fallen recently, and I believe that that’s what’s going to happen in the month of June as well. I’m not expecting anything major, and I do believe that the area near the 1.06 level should continue to offer support thereby keeping the pullback to a minimum. This makes sense of course, because the oil markets do look like the ready to breakout to the upside fairly significantly, and the 1.06 level is the beginning of pretty significant support on the weekly chart.
The top of that, you can make an argument for a trend line to intersect somewhere near that level, and thereby offering a nice longer-term buying opportunity. However, between here and there I suspect that the sellers will continue to put pressure on this pair. Ultimately though, I believe the real trade will probably happen towards the end of the month, when we get a decent bounce.
Oil markets and headlines.
The attention to the oil markets in the headlines coming out of places like the Crimea, as oil markets tend to have a fairly significant amount of influence on the Canadian dollar in general. That being the case, I believe that pay attention to these situations could very easily be the best way to play this pair. Ultimately though, I believe that be on the oil markets there is going to be more attention paid on the Federal Reserve in the fact that tapering could continue. That should bring it interest rates in United States up, which should continue to strengthen the US dollar longer-term. I just believe that the month of June might be a little bit of an anomaly in the sense that it might be a month where we pull back.
If you look at the recent trajectory of this market, you can see that we got a little bit overextended several months ago, and this is just a simple return to normalcy as far as the trajectory is concerned for the uptrend. In short, I believe that the sellers will have control in June, but it will be very limited.
