The USD/CAD pair fell to kick off the session, but buyers have returned to stabilize things again.
USD/CAD
The US dollar has drifted a little bit lower during the trading session on Friday, but we are starting to see buyers jump back into the market at the end of the session, with the 1.42 level being a little bit of a magnet for price. If we were to break down below the 1.4150 level, then we could see this market drop to the 1.40 level. That's an area that previously had been a significant source of resistance. I think it should be significant support. That offers value if we do, in fact, see that happen in this pair.
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Economic Divergence and Commodity Pressures
The Canadian economy is deteriorating while the US economy is still strong. It's not necessarily that I think the Canadian dollar is going to collapse, but it's pretty obvious to me that the currency markets have voted here. The US dollar is stronger, it will remain stronger, and now the possibility of a couple of interest rate hikes between now and the end of the year has people buying the US dollar against most currencies. The Canadian Central Bank, on the other hand, is sitting on its hands, and quite frankly, I think it has to. Whether or not it cuts remains to be seen.
But I think we've seen an extraordinarily bullish move for a reason, and these types of moves don't typically just disappear. This almost to the day coincides quite nicely with the stock market moves that we had seen in America, as it shows so much money flowing into the US, possibly from Canada, possibly from the European Union, more likely from everywhere.
Oil markets collapsing, of course, work against the Canadian dollar as well because it does an extraordinarily large amount of damage to the Canadian economy. Now this particular pair isn't the best vessel for that. The United States also produces plenty of oil, but it does wear down the value of the Canadian economy and the Canadian dollar in general, and this is what we're seeing play out. I like the idea of buying dips, and I think we will go looking at the 1.45 level.
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