The USD/CAD pair did very little during the session on Tuesday, but remained above the 1.05 handle. This level has been significant support over the last couple of weeks, and I believe that will continue to be. After all, the world awaits to see whether or not the Federal Reserve will taper off of quantitative easing, and this of course will have a massive effect on this pair, just as it would on any other pair involving the US dollar.
Oil markets of course affect the Canadian dollar as well, and we all know that the oil markets have been out-of-control recently. With that being the case, it's almost impossible to imagine a scenario where this market will be choppy for the short-term. After all, with all of the drama in both the Federal Reserve's decision and the oil markets, it's hard to imagine any clarity in the short term with so many variables floating around.
1.06 is the number I am looking for
I believe that if we can break above the 1.06 handle on a daily close, that would signify a serious breakout to the upside, and have the market targeting the 1.10 handle before was all said and done. One of the things that could possibly push the market in this direction is a breakdown in the oil markets, which are currently being pushed higher by headlines coming out of serious and Egypt more than anything else. On top of that, if the Federal Reserve does in fact taper off of quantitative easing, that will bring up the value the US dollar, which should have a dampening effect on the price of oil as well. So having said that, I believe there is a scenario where this pair does breakout above the 1.06 handle. Besides, it's hard to ignore the fact that this pair has been so bullish lately.
I think that the breakout won't come until after we see the decision by the Federal Reserve, but having said that there is the possibility that the oil markets move this market first.
