USD/CAD Forecast: Finally Sees Some Selling

The US dollar has fallen for once against its northern neighbor, something that hasn’t happened much over the last two months.

USD/CAD

The US dollar has fallen against the Canadian dollar during trading on Thursday, but quite frankly, that's not a huge surprise. After all, we've basically gone straight up in the air since the beginning of May, and if we end up negative for the session, this would only be the 5th negative candlestick since May 1st. In other words, it's an overbought market.

We are hanging around the 1.42 level. That, of course, is an area that's a large psychologically significant figure, so that might have a little bit of influence here, but I think over the long run, even if we break down below here, this is still obviously a very bullish market. The Canadian economy is a bit sluggish, and at the same time, the Federal Reserve is now expected to raise rates at least once this year, and some are calling for as many as 3 rate hikes. So, with that being the case, it makes sense that the Canadian dollar is being brutalized by the American dollar.

Potential Buying Opportunities at Key Support Levels

If we drop from here, and we break down below the 1.42 level, I'll be particularly interested in 1.41 and most certainly interested in 1.40 as potential buying opportunities. The interest rate differential continues to favor the upside, so if you are long of this market and staying long of this market, you get paid to be here; that's a big deal over time.

The 1.45 level could be the target; we'll just have to wait and see, but again, like anything else, there's only so much energy in one direction. We eventually have to have a little bit of a pullback. This could be the beginning of it. Even if it were, and even if I knew exactly how long it would last, I don't think I would short this pair. I don't want to pay the swap, and it would only take 1 announcement or 1 tweet in this environment to turn this market right around and go higher yet again.