USD / CAD forecast: increasing market pressure
The US dollar edged down against the Canadian dollar in Thursday’s trading session to drop below the 1.22 grip. This is a very negative turn of events, and the fact that we are getting closer to the bottom of the range suggests that we are likely to see a continuation of the overall trend. At this point, I think short term rallies will continue to offer selling opportunities, and clearly the 1.24 grip is a previous support area which should now be massive resistance. However, the canadian dollar is gaining ground for a multitude of reasons.
One of the main reasons the loonie takes offense is that commodities have been rallying for some time, and of course the Canadian dollar is an important commodity currency that is very sensitive to the appetite for the risk of futures traders. Ultimately, crude oil markets have a major influence, but especially the fact that the Bank of Canada hinted that they were going to start declining sooner or later, which is of course very optimistic for a currency.
On the other side of the equation you have the US dollar which is printed heavily and of course the US government is prepared to flood the economy with tons of stimulus. Spending $ 6 trillion in the first two months of his presidency, Joe Biden has accelerated what has been going on for decades. For this reason, it is very likely that the US dollar will continue to suffer, and as inflation picks up, it is likely that we will see the greenback continue to struggle.
The size of the candlestick is rather long, so this suggests that we have a bit of acceleration in this market, and with the number of jobs coming out on Friday, it is very likely that we will see a lot of volatility. If we get some kind of upside down pop, I will look for signs of exhaustion that I can start to wear off again. If the market were to break through the 1.24 level, I would look for a larger move, but at the moment I’m just doing away with the signs of exhaustion after rallies or selling on a breakdown below the bottom of the range.