The USD/CAD has produced a rather sizeable test for speculators the past week and trading conditions will likely remain challenging in the short term. After reaching a high of nearly 1.25910 on the 8th of July, the USD/CAD then stumbled towards the 1.24350 level on the 12th. Early trading this week has continued to demonstrate flashes of swift changes in value. Speculators are urged to use conservative amount of leverage, particularly if they are targeting large price changes within the USD/CAD.
As of this morning, the 1.25000 as support is within sight and traders should be braced for more volatility. While the past week of trading has produced daily values on a rather steady basis above the 1.25000 juncture, the last time this ratio saw sustained value above these prices was in March and April of this year, which was followed by bearish trading and produced a low in the USD/CAD near the 1.20000 marks in May and early June.
While the USD/CAD may look like it has been overbought in the short term, traders need to accept the bullish trend in the Forex pair has been rather steady since early June. The highs demonstrated on the 8th of July are still within sight and may prove enticing for traders with upwards perspective. Technically the trend has been bullish, but in addition to this momentum underlying sentiment may also be worried about the appearance of inflation in the U.S which appears to be affecting Forex.
However, there are reasons for bearish perspectives to linger too. The commodity market remains robust particularly within gold and crude oil, and these two physical resources are produced in large quantities in Canada which helps secure the need for the Canadian dollar. So the question regarding where risk/reward scenarios have their best potential outcomes remains difficult to interpret short term.
Traders are advised to remain conservative and use their risk management wisely near term. While short-term trading has developed some selling momentum this morning, traders may be tempted to look at the 1.25000 vicinity as a buying opportunity and seek reversals higher for quick-hitting trades. Having said that speculators should be braced for more whipsaw results over the next two days, and wagers which sell the USD/CAD at higher values near current resistance levels could potentially be worthwhile too.
Canadian Dollar Short-Term Outlook:
Current Resistance: 1.25200
Current Support: 1.24950
High Target: 1.25400
Low Target: 1.24500
