The US dollar rallied a bit against the Canadian dollar during the Monday session, breaking above the 1.27 level. As we are doing this, I believe that the market is trying to continue the recent uptrend that we had seen over the last several months, and if the oil markets can rollover a bit, that could give us an opportunity to go even further. At this point, I become much more comfortable going long at the 1.2750 level, as it should then send this market looking for the 1.28 handle, and then the 1.29 level. Overall, I don’t like the Canadian dollar, but I recognize that there are a lot of concerns when it comes to tax reform in the United States, and it probably needs to see some type of agreement or perhaps even in combination with the oil markets rolling over to get significant momentum to the upside. However, the underlying issue with the Greater Toronto Area housing bubble I think is going to be one of the major stories and 2018.
In the meantime, if we break down below the 1.2670 level, the market probably drops down to the 1.26 level, and then eventually the 1.25 level. This market tends to be very choppy and noisy, as the economies are highly intertwined. Overall, I believe that the 1.30 level above will be massively resistive, but could eventually get smashed through, especially if oil fails to perform. I think that oil is getting a little bit “long in the tooth”, as these higher prices will almost certainly attract more drilling in North America, and therefore should drive down the value of the commodity. Remember, the Canadian dollar is extraordinarily sensitive to crude oil pricing, as most currency traders use it as a proxy.
USD/CAD Video 14.11.17
This article was originally posted on FX Empire
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