The USD/CAD pair has exhibited volatility in the early hours of Thursday, yet it continues to acknowledge the 1.40 level as a significant point of interest. This is a substantial, circular, psychologically meaningful number that has held significance on several occasions previously. Consequently, it appears that the market is attempting to initiate a turnaround at this point in time. The outlook for the US dollar suggests a continued rally against the Canadian dollar in the long term, although recent fluctuations have introduced some volatility. That is not particularly unexpected. Numerous inquiries exist regarding our next steps.
It is my assessment that USD/CAD is likely to experience a significant rally in the future. However, it is important to recognize that the market has a unique characteristic, as the majority of trades executed in this pair are driven by necessity, particularly through cross-border connections and corporate activities. Indeed, certain corporations, such as General Motors, are American entities that manufacture automobiles in Ontario, for instance. These corporations may occasionally need to acquire Canadian dollars and subsequently convert those Canadian dollars back into US dollars. This pair exhibits considerable volatility and erratic movements.
The energy equation in the Canadian dollar versus the US dollar has been significantly impacted, primarily because the United States is currently producing approximately 12 million barrels of oil. The 50-day EMA is positioned around the 1.3960 level and is on an upward trajectory, indicating that it is likely to provide a degree of support.
The USD/CAD will target the 1.4250 level, a previously significant support area that broke down and has experienced considerable selling pressure and supply entering the market. The analysis of the previous consolidation’s measured move, along with the measured move from the inverted head and shoulders pattern, indicates that the 1.4250 level may be a target to consider for USD/CAD.