- As you can see, we had gone back and forth during the course of the trading session here on Monday, as we are now threatening the 1.42 level.
- This is a scenario where I think central banks are starting to take control here in the sense that the Canadian central bank is expected to cut rates.
So, it's already priced in the market. It's difficult to start buying here. What you need to see is some type of pullback in order to get aggressively long. The Canadian dollar is going to have less purchasing power going forward. In fact, Canada is the only one of the G7 economies that has zero gold backing it. It's kind of impressive really.
Top Forex Brokers
So, at this point in time, I do think that as long as we're willing to pretend that Fort Knox has all that gold in the United States, the US dollar will be a bigger winner, not only due to that, but the fact that the Federal Reserve might have to be a bit more hawkish than anticipated, especially once we get economic numbers this week on Wednesday and Thursday, giving us the inflation outlook. If those are stronger than anticipated, that will drive the US dollar much higher against the Canadian dollar.
There is a Floor Here
As things stand right now, I think there's a floor in the market near the 1.40 level. So as long as we stay above there, we're going to continue to threaten this massive area that although not a top previously was certainly an area where we had a lot of market memory. You can see that we could drive all the way to the 1.46 level and still be within the roughly 10 year range, maybe eight year range. So ultimately, I do think that this is a market that we'll try to get there.
The Bank of Canada with its interest rate decision this week being on Wednesday has to be watched because if they're particularly dovish in that statement, then you've got a situation where the Canadian dollar could really start to lose a lot of strength. They are expected to cut from 3.75% to a reading of 3.25% for their overnight rate. If they sound like they're going to cut even further, this USD/CAD pair is going to take off.
Ready to trade our USD/CAD Forex daily analysis and predictions? Here are the best Canadian online brokers to start trading with.