USD/CAD Technical Analysis – January 22 2015

The USD/CAD pair broke higher during the course of the session on Wednesday, as the Bank of Canada issued an interest-rate cut, bringing the rate down to the 0.75% level. Because of this, the Canadian dollar in general was punished, which has already happening anyway based upon the fact that the oil markets are so soft.

Once this market broke out at above the 1.20 level during the Tuesday session, the market should continue to grow higher as this was a significant resistance barrier. Now that this has happen, we can’t help but think that this is a market that you buy on dips, as we continue to grind our way up to the 1.25 level given enough time. It’s going to take a while, but at the end of the day I don’t see any argument for shorting the US dollar, nor do I see an argument for going long on the Canadian dollar.

Yes we may get a bounce in the oil markets soon, but ultimately I don’t think that’s enough to fix the Canadian dollar at the moment. The fact that the Bank of Canada felt the need to cut interest rates tells us that the Canadian central bank is a bit worried about the Canadian economy overall. Quite frankly, I believe that Canada runs a distant second to the United States right now as far as economic growth, but its proximity to the United States should keep the Canadian dollar fairly resilient against many other global currencies. However, the US dollar reigns supreme these days, and that certainly won’t be any different in this market as the trend is most certainly set, and buyers will step back to pick up perceived value every time this market pulls back.