Potential signal:
I am a buyer of this pair with a stop at 1.3985 and a target of 1.42.
- The U.S. dollar initially fell against the Canadian dollar on Monday but rebounded strongly.
- Given Canada’s sluggish economy, trade tensions, and favorable U.S. rate differentials, I remain bullish, targeting the 1.4250 level while buying on dips.
The U.S. dollar fell during the early part of the Monday session only to turn around and show signs of life against the Canadian dollar yet again. Ultimately, the Canadian dollar has quite a few issues attached to it, not the least of which would be the fact that the Canadian economy itself is somewhat sluggish. And of course, we also have to worry about the trade war and the various comments coming out of the United States, which does seem to be very anti-Canada at the moment.
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US/Canada Tensions Continue
If that ends up being the case, this is a market that I think continues to see a lot of questions asked of it. It is worth noting that the U.S. dollar has been very strong against multiple currencies later in the trading session. The 1.40 level has offered a significant support area for the pair, which is an area that previously had been resistance. I think a certain amount of market memory has come back to play in this market.
I believe that the U.S. dollar against the Canadian dollar continues to be a market that you want to be a buyer of. At this point in time, I just don't see why you would want to go in the other direction. This isn't to say that the U.S. dollar is going to go skyrocketing against the Canadian dollar, just that the interest rate differential paying you to hold onto this pair and the big supply target at the 1.4250 level are just a bit too juicy for a lot of traders out there, at least in my estimation, to ignore. I'm a buyer of dips in this pair, and I do believe that we will reach the 1.4250 level before it's all said and done.
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