USD/CAD forecast for the week of August 7, 2017, Technical Analysis

The US dollar rallied significantly this week against the Canadian dollar, and as the jobs number came in on Friday, the Canadian report missed, while the American report was much better. The market broke above the 1.25 handle, and formed an extraordinarily bullish candle. The candle wiped out the last couple of weeks, and more importantly bounced off the uptrend line on the longer-term charts. Because of this, I think that perhaps the market has finally found enough value to start buying again. While the oil markets are trying to show signs of life, I believe that the Canadian dollar is overdone. Remember, most of this trade has been about the bond markets, and now that it looks like the Federal Reserve is much more likely to raise rates due to the jobs market, I believe that the “buy Canadian bonds, short American bonds” trade is going to start unwinding.

Canadian housing

Adding more fuel to the fire is that it looks like the Toronto housing market is finally starting to pop the bubble. Transactions in the last month have gone down over 40%, which is a very troubling sign for one of the hottest housing markets in the world. We are starting to see prices drop as well, and because of this we may see a bit of a financial issue with Canadian banks going forward. Longer-term, I think this market could go looking to the 1.30 level, and perhaps even higher if the overall uptrend continues. Either way, I think the next move is going to be to the 1.30 level as it was previous support and where we broke down significantly. Alternately, if we turned around and broke down below the uptrend line, the market could send much lower.

USD/CAD Video 07.8.17