USD/CAD Forecast: Canadian Dollar Attempting to Strengthen

At this point, I think we are getting rather close to making another decision, and the next couple of days could be crucial.

The US dollar fell significantly on Monday to test a significant uptrend line. We did bounce back above it, but we are sitting right on that line, suggesting that perhaps we are going to go lower. That being said, we are also right in the middle of a massive area of support that starts at the 1.16 level and extends all the way down to the 1.15 handle.

Furthermore, we also have the 50-day EMA trying to turn around and take out the 200-day EMA to the upside. This is what is known as the “golden cross”, which is a longer-term signal to get long. The market had recently been rallying, but now the question is whether or not we are done. A lot of it is going to come down to interest rates, because the oil markets have been rising somewhat non-stop, even though the Canadian dollar has been losing value at the same time, taken from a longer-term perspective.

At this point, I think we are getting rather close to making another decision, and the next couple of days could be crucial. It is most certainly logical, considering that we have the jobs number coming on Friday for both countries, so this will have a major influence on how traders believe the economies are moving. Right now, it is about interest rate expectations, as the central banks are looking at the possibility of tapering and tightening.

Interest rates in the United States have been rising for a while, and that is part of what has been so crucial when it comes to the value of the greenback, despite the fact that there has been a huge rush into oil. That being said, if we do break down below the 1.25 handle, then this pair is likely to go screaming to the downside, perhaps testing the 1.20 handle. On the other hand, if we can break above the 1.2650 level, it is likely that this market will go higher, continuing the overall grinding back and forth with a slightly upward tilt that we have seen over the last several months. Either way, I think the next couple of sessions will be crucial so keep an eye on this chart as we could be setting up for a longer-term trade rather soon.

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.