USD/CAD Forecast: US Dollar Pummels Canadian Dollar

If the rally in oil truly is over, this pair has a long way to go before it would get back to normalcy.

The US dollar initially fell again against the Canadian dollar, but after oil started to fall, we saw a complete reversal and what is almost certainly a candlestick that will catch a lot of attention. After all, we have broken above the 1.25 handle in a market that has gone straight up in the air. After the crude oil markets broke down, the Canadian dollar gave back a massive amount of gains, as the Thursday candlestick completely engulfed the previous three trading sessions. Beyond that, what is truly impressive is the fact that there were wicks above those candlesticks that showed a lot of selling pressure. As the day closed out, those wicks had been engulfed as well. In other words, whoever was selling in that area is now losing money.

This does not necessarily mean that the market has to turn around and go straight up in the air forever, though. I do recognize that we are very bearish in general as far as the trend is concerned, and that is something that should be paid close attention to. That being said, one can make a very serious argument for this pair going to at least the 1.26 handle where we would meet up with the 50-day EMA. That is also the area where we sold off from most recently, so this countertrend bounce could be just that - a countertrend bounce. One certainly has to pay a certain amount of attention due to the fact that this was such a brutal move in such a short amount of time.

If the rally in oil truly is over, this pair has a long way to go before it would get back to normalcy. We are dancing around an area that is major support on the monthly chart so that should be paid close attention to as well. I believe that the bond market will continue to be a major influence on most Forex pairs, as a strengthening US dollar tends to wreck commodity currencies and anything close to being a risk appetite type of market. With that, I will be watching closely as to whether or not the 10-year yield continues to go higher, which looks as if it wants to go to the 2% level now that we had touch the 1.75% level during the trading session on Thursday.

USD/CAD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.