The USD/CAD pair rose initially during the day on Tuesday, but as you can see turned back around to form a bit of a shooting star. The shooting star of course is a negative sign but quite frankly I have no interest in selling this market as it has been in such a strong uptrend. Without a doubt, the US dollar has been one of the favored currencies around the world so I think at this point in time it’s almost financial suicide to bet against it, especially when it comes to the Canadian dollar as it has been extraordinarily soft lately.
Ultimately, I think this comes down to the lack of strength in the crude oil market, as the Canadian dollar is treated as a proxy for that particular commodity. This commodity of course is in serious trouble due to a lot of different things, not the least of which is the strengthening US dollar. In that sense, this is a market that is almost self-perpetuating as the cycle returns again and again.
2 Million Barrels
Canada’s biggest problem right now is the fact that the world is currently extracting an extra 2 million barrels of crude oil out of the ground each day. That means that the supply far outweighs the demand, and that of course works against the value of crude oil overall. This means that the Canadian dollar will continue to be sold off.
I believe that the 1.40 level will eventually get broken, but it is psychologically significant and has been important on longer-term charts in the past. Because of this, I think that it might take several attempts to finally get above there. Once we do though, this is a market that could be more or less be traded in the vein of “buy-and-hold” as far as I can see. I think that the 1.35 level below is essentially the “floor” in this market, and that it’s only a matter of time before buyers enter on any pullback.
