The USD/CAD experienced another rally, reflecting ongoing fluctuations that are nonetheless indicative of positive trends. This aligns well with the current economic landscape, particularly as the interest rate differential is advantageous for the US dollar, while the Canadian dollar has been under significant pressure for some time. Assuming all factors remain constant, this market presents an opportunity where, in the event of short-term pullbacks—which are inevitable from time to time—it is prudent to consider purchasing this currency pair, as the interest rate differential provides daily returns.
The 1.40 level below represents a substantial, round, psychologically important figure and is a zone that many USD/CAD market participants will be monitoring closely. Should we experience a decline below that level, the 50-day EMA is positioned to provide support. The market may ultimately target the 1.4250 level, a significant area that has historically seen a substantial influx of supply leading to a downturn. Given this situation, I anticipate that the 1.4250 level will attract significant attention as both a target and a resistance point.
Upon examining the longer-term trajectory of the USD/CAD pair, one could argue that we have just experienced a breakout from a rather unattractive inverted head and shoulders pattern, indicating a potential move towards the 1.4250 level as well. In summary, this market appears poised for movement over time, particularly in light of the ongoing trade tensions between the United States and Canada, which ultimately benefits the United States. Canada’s economy constitutes approximately 8% of the US economy, and it is, in fact, smaller than that of Texas.
It appears that many individuals overlook that aspect. Given the current situation and the decline in oil prices, it is logical that the Canadian dollar is experiencing continued weakness. I have been consistently purchasing dips in the USD/CAD pair for several months and will maintain this strategy until there is a fundamental shift.