USD/CAD Forecast August 26, 2015, Technical Analysis

The USD/CAD pair initially fell on Tuesday, but found enough support near the 1.3150 level to turn things back around and go much higher. The fact that the Canadian dollar continues to sell off is not much of a surprise, because quite frankly oil markets look very soft. Oddly enough though, it is strange to see that the oil markets actually rallied on a day that the Canadian dollar fell. With this, we believe that the market has simply made up its mind to continue going higher over the longer term.

We believe that the next large, round, psychologically significant resistance barrier that the market is going to aim for is the 1.35 handle. This pair does tend to grind more than anything else, because the 2 economies are so intertwined. With this, we believe that you will have to be patient, but at this point in time it does look like we are going to continue going higher over the longer term. Quite frankly, we would even be interested in adding to our position on short-term pullbacks as we believe that the trend is very well ensconced in this pair.

Remember that the 1.30 level was a significant barrier to get above and the long-term scheme of things, as it was an area that the market stalled at after the financial crisis. Because of that, we believe that breaking above there signals that we are going much higher given enough time. It is in fact a major event to get above that level. On top of that, oil markets do not look like a finding support at all at this point in time, and with that it’s going to be very difficult to imagine that the Canadian dollar suddenly going to strengthen.

Keep in mind, the US dollar absolutely meltdown against most currencies during the session on Monday, but barely moved against the Canadian dollar. If there is one thing on this chart that stands out to us, it’s the fact that even the massive selling of the US dollar in that circumstance had little effect here.