USD/CAD Forecast: Range Favors USD
- The US dollar did fall slightly during the trading session on Wednesday against the Loonie.
- But really at this point in time, I wouldn't read too much into it due to the fact that it was Juneteenth in the United States.
- Canada was open for business, so it may have just been a function of that.
That being said, it's also worth noting that the market has been in a bit of a consolidation phase recently, with a 1.36 level underneath being a major support level, especially against the 200 day EMA is running towards it. On the other hand, if we turn around and show the upside again, the 1.38 level should be a bit of a ceiling.
This is a pair that does tend to be very choppy because of all of the cross-border traffic and exchanges that we see. Anybody who's been either to the International Peace Bridge or the Ambassador Bridge can tell you that the amount of traffic going back and forth between the United States and Canada is pretty impressive. So, with that being the case, I do think you've got a situation where we continue to trade in this range.
Range Continues to Favor the USD
(Click on image to enlarge)
But I do think it favors the greenback, mainly due to the fact that the Bank of Canada has recently cut rates. The Federal Reserve remains fairly tight with its monetary policy. With this being the case, I think I'm going to be looking for signs of a short term balance that I can buy into. The closer that we get to the 1.36 level, the more likely I am to jump into the USD/CAD pair.
I don't have any interest in selling, at least not anytime soon. But if we broke down below the 200 day EMA, I'd have to at least consider it. If that were to happen, I think it would reflect a deeper issue with the greenback, and therefore I would think that if this pair falls like that, the USD will be falling against everything. At this point, we don’t see it.
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