The US dollar rallied against the Canadian dollar on Monday, as we continue to see pressure upwards.
USD/CAD
The US dollar rallied against the Canadian dollar during trading on Monday as we continue to see interest rates in the United States take off to the upside. Ultimately, this is a market that I think continues to see a lot of buyers anytime there is a bit of a buy on the dip mentality.
And that does make sense considering that the interest rate differential favors the United States over Canada, but beyond that, we also have the fact that the Canadian economy seems to be slipping while the US economy still seems to be running hot. Furthermore, it now looks as if the Federal Reserve is likely to keep interest rates higher for longer and could possibly rise by 25 basis points between now and the end of the year.
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Market Outlook and Support Levels
If that's going to be the case, then it makes sense that the greenback continues to trade stronger than the Loonie. Short-term pullbacks do make a certain amount of sense, though, considering that we are overbought at this point in time, and I think ultimately, we are looking at this as a market that sees a lot of support near the 1.40 level.
And I do believe that if we do see a little bit of a drop from here, that opens up opportunities for those looking to find cheaper greenbacks. I have no interest in shorting this USD/CAD pair, at least not until the overall situation changes not only in the Middle East but the entire global economy, and of course, Canada starts to perk up a bit. At this point, I think any pullback, which of course is probably long overdue, is an opportunity for buyers to get involved.
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