USD/CAD forecast for the week of August 3, 2015, Technical Analysis

The USD/CAD pair fell during the majority of the week, but as you can see on the chart, we have drawn a red line at the 1.28 handle, which is the area we broke out above recently. That should now be the bottom of support, and of course the 1.30 level is a large, round, psychologically significant number that should be supportive as well. We look at this as a supportive “zone” in this market, and as a result we think that the buyers will come back into pushes market higher given enough time.

At this point in time, if we can break above the top of the hammer, we are buyers as the longer-term move higher should continue. After all, you have to keep in mind that the 1.30 level was where the markets stopped cold during the financial crisis a couple of years ago. With that, it’s only a matter time before the buyers step into this market and push things much higher.

On top of all that, you have to keep in mind that the crude oil markets are looking horrible at the moment, and that will continue to work against the value of the Canadian dollar in general, and as a result should provide bullish pressure in this marketplace as well. We believe that the market is going to very quickly become a “buy-and-hold” type of situation, as well as “buy on the dips.”

The Canadians recently had a surprise interest-rate cut, and that of course is what finally push this pair above this area. You have to wonder whether or not the Bank of Canada recognize that this was a technically significant barrier that could be pushed above due to that move. But that’s case, clearly the bank of Canada wants to see this pair go much higher. The Federal Reserve is expected to raise rates sometime later this year, so this market is simply moving incongruence with that thought process, as the US dollar continues to be one of the most favored currencies that we follow.