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USD/CAD medium-term overview: Headed for 1.17+?

I’ll start this analysis with the Rider that my track record on the Loonie is not that strong and I don’t spend as much time analysing it as I do on the other majors. Nevertheless, the CAD is an important component of the overall FX jigsaw puzzle and I have a strong sense that we are soon to see some very extended CAD weakness.

There are people who are a lot better qualified than me to comment on the fundamentals behind the CAD and I prefer to focus on where it’s come from and whether it’s at fair values. Remember that USD/CAD fell from 1.60 in a virtual straight line (see chart) through the GFC and the question is whether it’s fall was over-extended. If it was, then levels near 1.0000 can be considered cheap and it would not be considered ‘over-valued’ until it reached 1.30+ imho. Could the Fed ‘taper’ be the trigger for this move? Possibly, but that will depend on how the macro players are positioned.

Other pairs like GBP/CAD (see chart) still have a long way to go before they reach even their minimum retracement, and the bullish momentum in this pair is clear to see. I haven’t been actively trading any CAD pairs and therefore have no strong feel for what the big levels might be.

Timing is all that matters in the FX market but my sense with the CAD is that we are in for a big move lower which will take USD/CAD towards 1.20 and GBP/CAD to 1.90.

 

  1. USDCAD is the most difficult pair to trade in my opinion because it is a sleepy pair most of the time. Now everybody predicting a range between 1.10 and 1.20 and all of them came within last two weeks. As Sean is also supporting that, I am also joining the party with 1.17 as target.

  2. That is a really good analysis, you don’t have to apologise for anything Sean. So I take it that USD, EUR and GBP are the favourite currencies for institutional buyers in the current market trend.

    Thanks Tom for your advise.

  3. You’re a brave man Tom, siding with me and USD/CAD 🙂 I think the most difficult thing with the Loonie is the timing. It eventually does the logical thing, but only after 23 reverses, pivots and somersaults.

  4. Hi Andrew. Yes unfortunately it was proving too difficult for him to continue. Pity, at one stage he got 15/16 right and all with good r/r. When he was in the zone, he was able to get in perfect sync with mkt moves.

  5. Hi Sean. I agree, a move to higher levels looks to be on the cards but if the weekly candle closes as a bearish engulfing, preceded by a shooting star and failure to close above the 2011 highs it could provide a short term correction and opportunity to get long closer to trendline support with good r/r.

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