- The US dollar has rallied a bit during the early hours on Tuesday against multiple currencies, so it should not be a surprise at all to see that the Canadian dollar is also suffering at the hands of US dollar strength.
- We find ourselves at the 1.38 level, which of course is a large round psychologically significant figure and an area that's offered both support and resistance multiple times.
We are currently stuck between the 50 day EMA and the 200 day EMA indicators. So, a lot of people will be watching this area for volatility. Furthermore, on Friday, we get the jobs reports from both countries simultaneously. And therefore, I would anticipate that Friday should be a wild session in this pair. Yes, it will end up being the epicenter of Forex trading there late on Friday.
If we can take out the 200 day EMA to the upside currently sitting at the 1.3872 level, then I think the US dollar has a real shot at going to 1.4 followed by 1.43. Short term pullbacks are very possible, but I think there is a ton of support near the 1.36 level. So, I do believe that the downside is somewhat limited in this environment. The Federal Reserve is expected to cut rates and therefore the interest rate differential will start to tighten a bit.
Top Forex Brokers
Bonds are Unsure
But the bond market doesn't seem so excited about that as rates have actually been going up in the United States in the long end, at least. In other words, we have a mess on our hands, but with the recent trade tensions between the United States and Canada, while there is an assumption that there will be an agreement, the reality is that Canada has a lot more to lose than the United States just in terms of economic growth and GDP. In fact, the Canadian exports numbers that just came out were some of the worst on record, mainly due to the tariffs in America and the issues with trade with what ends up being 25 % of its GDP exports to the United States.
Eventually, that weighs on the Canadian dollar. For what it's worth the old school correlation between oil and this pair has disappeared because quite frankly the United States produces 12 and a half million barrels of oil a day. while you might see Canadian strength against other currencies, it won't be against the US dollar just because of oil.
Ready to trade our USD/CAD daily analysis and forecasts? Here's a list of the best Forex Trading platform in Canada to choose from.