USD/CAD Forecast: US Dollar Rolls Over as Oil Strengthens

Christopher Lewis

The US dollar initially rallied on Monday but gave back gains rather quickly as the WTI Crude Oil market strengthened. In fact, oil broke out of a major triangle that I have been following, so it does make sense that we would see the Canadian dollar rally as a result. Ultimately, the US dollar losing a little bit of ground made a certain amount of sense anyways, due to the fact that the US dollar was so overbought.

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The 1.29 level is an area that has been important more than once, so is not a huge surprise to see that we had a little bit of reaction there, but the fact that we have broken through there does suggest that we could see a little bit of further weakness. This will also be greatly influenced by the oil market, so if we see the crude oil start to take off again, then it is likely that we would see further downward pressure. However, you should also keep in mind that the US dollar is considered to be a safety currency as well, so it does make sense that we could see markets run back toward the greenback. However, we may get a bit of divergence in general, as the two economies are so highly intertwined. That being said, will have to wait and see how this all plays out, but it certainly looks as if we are going to continue to see a lot of noisy behavior.

At this point, you will need to keep an eye on the oil market, interest rates in the United States, and the US dollar’s strength or weakness across the board. The volatility is going to increase before it falls anytime soon, so at this point, it is likely that we will continue to see a lot of noisy behavior, and you need to be very cautious about your position size. I do think that it is only a matter of time before the buyers come back though, because quite frankly we are suffering at the hands of uncertainty, and that breeds demand for US dollars over the longer term. In the short term though, we may have a little bit of a pullback on our hands.

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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