The USD/CAD pair initially tried to rally during the week but turned around and fell through the 1.28 level. This was predicated upon the Bank of Canada raising interest rates, which of course is very bullish for the Canadian dollar. A breakdown below the 1.28 level shows that the market is probably trying to reach down towards the 1.26 handle, and then possibly even lower than that. The fact that the candle is so negative that it looks like the market will sell rallies going forward, as the US dollar is getting pummeled in general. Looking at this, if we can get some type of rally and the crude oil markets, that will also just add more bearish pressure in this market.
The market breaking below the uptrend line on the weekly chart a few weeks ago was a very bearish turn of events, and now it looks as if we are going to go even lower. The market has a trend line below near the 1.23 level, so we could go as low as there. It will take a while to get there obviously, and we could bounce from time to time, but those bounces will be sold as far as I can see. The Canadian bond market is very strong, and therefore I think we will continue to see this drive to the downside. There is a housing crisis brain and Canada, so it will be interesting to see if that comes into play, but right now it certainly doesn’t look to be on the mind of most traders. It is not until we break above the 1.30 level that I would consider buying, and even then, I think it would be very difficult.
This article was originally posted on FX Empire