USD/CAD Forecast: Pulls Back Against the CAD as Oil Rallies

• The USD/CAD has pulled back just a bit during the trading session on Wednesday as the crude oil market has rallied somewhat.
•  Keep in mind that the Canadian dollar is highly sensitive to the crude oil markets, so if we do see crude oil strength continue, that should help the Loonie against the US dollar.
• I don’t necessarily think this is a situation where we have a one-to-one correlation. After all, there are a lot of things going on over the next couple of days that will greatly influence where this pair goes next.

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The Jerome Powell speech late Wednesday will have an influence on the US dollar, so therefore it will have an influence on this pair. The Core PCE figures that come out on Thursday will be greatly influential as to what happens with the US dollar as well, as people trying to figure out what the Federal Reserve is going to do next. After that, we have the jobs report from both the United States and Canada coming out at 8:30 AM Eastern Standard Time simultaneously. This will obviously cause a lot of noise in this pair, so be aware of that.

CAD is on its Back Foot

From a technical analysis standpoint, we are above the 50-Day EMA and have bounced from the 1.35 psychological barrier. It should also be noted that the 1.35 level was previous support, as we formed a head and shoulders pattern there. We have fulfilled the basic measured move of that pattern, so it all comes together and looks as if this might be an area of interest. The next couple of days will determine where we go for the next few weeks, but right now it must be said that the Canadian dollar looks like it’s on its back foot.

At the 1.38 level, we had sold off quite drastically to form the right-hand shoulder of the head and shoulders pattern, so if we can break above there it’s likely that the US dollar will continue to climb quite drastically, perhaps reaching the $1.40 level next, as the Loonie continues to get pounded not only due to the fact that oil has been noticeably weak over the last couple of months but the fact that there is a major housing problem in that country.

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