USD/CAD Forecast: USD Breaks Through Resistance Barrier

Christopher Lewis

This pair does tend to be very choppy and noisy though, so you need to be cautious about how much money you put in it at any one time.

The US dollar rallied on Friday to break above the top of the shooting star from Thursday. If you remember my analysis yesterday, the shooting star top was right at the same level as we had seen a previous attempt to break above the 1.2650 level. The fact that the market has broken above there tells me that the US dollar has further to go against the Loonie, perhaps due to interest rate differentials, or maybe it is just simply because oil continues to slide. That being said, I do not expect oil to continue falling much longer, so I think this has more to do with something a little bit bigger than the typical crude oil/Canadian dollar correlation.

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Looking at this chart, we are well above the 200-day EMA, and it certainly looks as if the greenback is ready to go higher. It is worth noting that we had bounced from the 1.20 level below, when all of this started. The 1.20 level is a major support level on longer-term charts, going back several years. Now that we have bounced again, it looks like we are going to threaten the 1.29 level somewhat soon. This pair does tend to be very choppy and noisy though, so you need to be cautious about how much money you put in it at any one time.

If we turn around and break down below the 200-day EMA at the 1.2567 level, it is possible that we could continue to drop, but I do not see that happening in the short term. Even if we did, the 1.25 level should be supportive from a psychological standpoint as well as the fact that the 50-day EMA is curling above it. This looks as if the US dollar is ready to continue going higher, unless we see a sudden reversal of the fortunes for the US dollar. That does not seem to be in the cards right now, as traders are starting to diverge a bit from the narrative that we had seen for so long. With this, I am a short-term “buy on the dips” type of trader, recognizing that the markets will continue to be very noisy, but I do think that we have an opportunity here for those who are a little bit more longer-term inclined too.

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.

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