- The US dollar has initially rallied against the Canadian dollar during the trading session on Friday, to peak above the 50 Day EMA, but it has since seen a little bit of overhead resistance.
- This is a pair that is going to be very news driven, and one that I get a lot of questions about.
The technical analysis is somewhat sideways, but I don’t know if the technical analysis can give you a lot in the way of directionality in this market. After all, the 50 Day EMA is important to point out, but it’s also sideways and it suggests that we are going nowhere. We have a certain amount of support near the 1.43 level, and then again at the 1.42 level. If the market were to rally from here, it’s likely that we could go as high as 1.45, but that’s an area that has been very difficult to overcome, and it is the top of the overall trading range that we are currently in. All things being equal, this is a market that doesn’t have anywhere to be, but that is about to change rather rapidly from what I can see.
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Tariff War
The United States and Canada are on the verge of a significant terror floor, and quite frankly, it doesn’t look like the Canadians are willing to back down like the Mexicans did. In other words, this is something that is probably going to get rather nasty, and it does make a certain amount of sense that the Canadians are pushing back a bit, due to the fact that they are on the verge of an election, and it has become good political theater to fight against Donald Trump. While Canadians certainly do want to fight, the reality is that a lot of this is coming from Mark Carney, the acting Prime Minister of Canada. With the horrific approval levels of Justin Trudeau, this seems to be partly a political strategy as well, for the Labour Party to retain power.
The Canadian election is April 28, and we could see a lot of tit for tat noise between now and then. That being said, the Americans of course have the upper hand due to the size of the economy, so I still favor the upside unless something changes quite drastically in the tone of the conversation. With the election coming, I don’t think that is likely.
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