- USD/CAD remains choppy around the key 1.40 level, but longer-term signals still favor U.S. dollar strength.
- Corporate flows, energy dynamics, and technical support near the 50-day EMA contribute to noisy trading as the pair eyes 1.4250.
The US dollar has been rather choppy against its Canadian counterpart during the early hours on Thursday, but it still recognizes the 1.40 level as an area of importance. It's a large, round, psychologically significant figure that has been important a couple of times in the past. As a result, it does look like a market that is trying to at least turn around at this juncture. I believe the US dollar will continue to rally against the Canadian dollar over the longer term, but it has been a little bit noisy recently.
Top Forex Brokers
That's not a huge surprise. There are a lot of questions out there as to where we go next. And I think this is a pair that eventually will rally quite a bit, but keep in mind that this is also a market with a certain distinct flavor to it as the bulk of the trades that are facilitated in this pair are done out of necessity through cross-border connections and corporations.
Much Trading is Done Out of Necessity
In fact, there are some corporations like General Motors that are American corporations that produce automobiles in Ontario, for example, that may have to buy Canadian dollars from time to time and then turn around and convert those Canadian dollars back into US dollars. So, you get a lot of noisy, and choppy behavior in this pair. And of course, the energy equation in the Canadian dollar against the US dollar has been somewhat decimated due to the fact that the Americans are producing roughly 12 million barrels of oil at this point.
The 50-day EMA is sitting near the 1.3960 level and rising, and I think it should be a certain amount of support as well. To the upside, I would anticipate that eventually this market will go looking to the 1.4250 level, an area of significant support previously that then broke apart and has seen a lot of selling pressure and supply enter the market. The measured move of the previous consolidation and the measured move of the inverted head and shoulders suggest that we could be looking at the 1.4250 level as well.
Ready to trade our Forex USD/CAD predictions? Here are the best Canadian online brokers to start trading with.