The USD/CAD pair fell during the day on Monday, but did bounce a bit at lower levels. Ultimately, this is a market that I don’t have any interest in selling because of the strength of the uptrend that we have seen for some time, and as a result I believe that every time we pullback, people look at it as potential buying opportunities. You see that I have a long-term trend line underneath, and at this point in time I believe that trend line will continue to offer buying opportunities. I also believe that the 1.30 level below is also supportive, so it’s not until we break down below there before I would remotely consider selling this market. With that being said, this is essentially a “long only” market as far as I can see, especially considering of the number one driver of the Canadian dollar.
Correlation
Obviously, the crude oil markets are very important for the Canadian dollar, mainly because of the export of Canadian oil into the United States itself. With this being the case, I believe that the United States dollar will continue to climb against the Loonie, simply because the oil markets have given us a lot to worry about. Beyond that though, we also had a strong US jobs number for the month of July, while we had an actual loss of Canadian jobs during that same month. In other words, it makes sense that we continue to go higher.
As we rally, there will be times when we pull back a bit, so it makes sense that we may have to struggle a bit. Given enough time though, I am a buyer of every pullback that shows any signs of strength, as the Canadian dollar is considered to be a commodity currency, and that of course makes it a bit “riskier” than the US dollar as historical trend show.
