The USD/CAD pair initially fell during the course of the day on Friday, testing the 1.2350 level. However, both countries have their employment numbers come out during the session, and as they both were positive, we came back to the same dynamic that we have been in for some time. In other words, not much had changed because both economies stayed essentially where we thought they were before the announcement. With the Bank of Canada recently cutting interest rates, it makes complete sense that the pair should continue to go higher based upon the shrinking interest-rate differential to begin with. Adding to that is the significant bearish pressure that we have seen in the oil markets, which of course have a significant influence on the Canadian dollar itself. Because of this, I believe that the Canadian dollar will continue to fall overall, pushing this pair higher.
Above is 1.30, and that means a lot
Above this area is the 1.30 level, which was the absolute highs after the massive upsurge that we had seen just after the financial crisis. Because of this, I think that the pair is going to bounce around between the 1.25 and the 1.30 levels for some time, but I still have an upward bias. Quite frankly, if we could ever get above the 1.30 handle, the Canadian dollar is in serious trouble.
In the meantime, I believe that if we can break above the top of the hammer that had formed during the session on Friday, we should then go to the 1.28 handle. I don’t know that we’re going to break out above there right away, and a little bit of consolidation would necessarily be the worst thing at the moment anyway. On the other hand, if we broke down below the bottom of the hammer, essentially cracking the 1.2350 level, we could go down to the 1.20 handle where I would anticipate a massive amount of buying pressure to present itself and offer value in the US dollar that cannot be missed.
