USD/CAD forecast for the week of May 16, 2016, Technical Analysis

The USD/CAD pair initially fell during the course of the week but turned right back around to form a bit of a hammer. The hammer sits just below the 1.30 level, which of course is a large, round, psychologically significant number. This is also an area where we had seen a lot of support previously, so having said that it’s likely that we could break out to the upside. If we can get above the 1.30 level, this pair could continue to grind its way much higher as we have been a bit oversold recently. Remember, the Canadian dollar is highly influenced by the oil markets, so pay attention to them. As well rises, this pair tends to fall as it favors the Canadian dollar in the Forex markets as well.

On the other hand, if we managed to break down below the bottom of the hammer for the week, it would be very negative and would send this market much lower. This would have to come simultaneously with a rise in the oil markets, so we have to keep an eye on both of those markets as they do tend to correlate very nicely. However, it looks as if the oil markets are struggling at this point in time as we are running into significant resistance above. That should send this market higher.

If we do rally from here, we could very well find yourselves going all the way to the 1.35 handle, which of course is the next large, round, psychologically significant number above the 1.30 handle. Remember, we have been in a strong uptrend until recently, so it be interesting see how the market reacts to this most recent turnaround over the last couple of weeks. I do see quite a bit of noise though, so it’s not a silly going to be the easiest way to make to the upside, it just seems to be the more obvious move at this point in time. Having said that, keep in mind that there will be a lot of volatility to hang onto.