USD/CAD forecast for the week of December 21, 2015, Technical Analysis

The USD/CAD pair broke higher during the course of the week, slamming into the 1.40 level. Because of this, we have fulfilled what would have been our first target from the longer-term perspective. A pullback from here is likely, but quite frankly we think that will only end up being a buying opportunity given enough time, as this market is most certainly in an uptrend. The uptrend is very strong, and because of that we are not surprised to see buyers enter at lower levels as it should be value in the US dollar.

There are a lot of different reasons the think of this uptrend continues, not the least of which is the velocity. However, that velocity cannot be kept up forever, so a pullback should just simply be more momentum building to try to break out to the upside given enough time. The Canadian dollar is struggling overall, and has been sold off drastically against most other currencies, so that tells us that the reason for the Canadian dollar fall so drastically is the oil markets. They are absolutely bearish at this point in time, so there’s no real relief coming for the Canadian dollars far as we can see.

Adding to the pressure in this market is the fact that the US dollar is the strongest currency in the world at the moment, and that the US economic numbers are continuing to impress most traders. Because of this, we don’t see the trend changing anytime soon and we believe that there is essentially going to be a “floor” in places where we have seen massive resistance previously, namely the 1.35 handle.

On the other hand, we could break above the 1.40 level right away, and that obviously would be very bullish sign. Truth be known though, we actually prefer pullbacks, as they represent value and give us a little bit more “wiggle room” in what is an otherwise “one-way trade.” It is not until we break down below the 1.30 level that we would consider selling, something that doesn’t look very likely anytime soon.