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USD/CAD Forecast: USD Continues to Dominate

Look at those pullbacks as a potential buying opportunity.

The US dollar has rallied significantly against the Canadian dollar during trading on Monday as we continue to see a push much higher.In fact, the 1.38 level now looks to be threatened, although it is worth noting that we are clearly overbought.I do think that we are going to see a bit of a pullback in the short term, but quite frankly this is going to end up being a buying opportunity.


Canada has a whole list of issues that has to deal with right now, not the least of which would be falling oil prices. Beyond that, you also have to worry about the Canadian housing market falling quite drastically, and the “everything bubble” affecting the commodity markets around the world right now. The US dollar is of course thought of as a safety asset, while the Canadian dollar is a little bit riskier. This is not to say that the Canadian dollar is going to disintegrate, just that as the world looks for safety, that puts much more upward pressure on the US dollar than it does the Loonie.

Looking at this chart, I believe that the 50-Day EMA sitting near the 1.31 level will be the “floor in the market” on any significant pullback. I would look at those pullbacks as a potential buying opportunity but I also recognize that the markets can remain irrational for much longer than you ever anticipate. It’s worth noting that the 1.38 level has been significant in the past, right along with the 1.40 level. In that scenario, if we were to tear through both of those levels, the US dollar could really start to take off at that point.

As far as selling the greenback against the Loonie, I have no interest in doing so anytime soon. It would take a reversal from the Federal Reserve to make that happen, because both central banks have been extraordinarily hawkish. There might come a day where the Federal Reserve has to loosen its monetary policy to save the world economy, but we are not there yet. Furthermore, if the US heads into a recession, this really hurts Canada, because Canada sends most of its goods south of the border. Never underestimate the integrated economies between these 2 countries, because they are most certainly tied together.

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