The USD/CAD pair has bounced off of an uptrend line during the month of July, at a particularly important spot on the chart. Because of this, I believe that the uptrend continues, and that more than likely we will in fact see the Canadian dollar sell off going into the month of August, and probably for the longer term as well. After all, the uptrend line has been valid since late summer of 2012. I know it’s a bit odd to think that this pair has been in an uptrend for that long, simply because it’s been fairly quiet for most of that time.
However, think about what’s been happening. We’ve seen the oil markets go much higher over this time frame while the Canadian dollar has been absolutely beaten up. The old correlation of higher oil prices with higher Canadian dollar values seems to have been thrown out the window. In this particular pair, I believe that a new dichotomy is starting to take hold. I think that the world is waking up to the fact that the United States is actually an energy producing giant, and reliance on Canadian oil is starting to become minimal. In fact, the Americans are starting to produce most of their petroleum domestically. This goes against conventional thinking, although don’t get me wrong - the Canadian still send plenty of oil south.
The trend is set, I’m not fighting it.
I think that the trend is pretty well set, and the fact that towards the end of the month we broke above the 1.08 handle, and even broke above the top of a nice-looking shooting star at that same area, tells me that this market is ready to go higher in my opinion. I think that we will ultimately see this market test the highs again at the 1.1250 area, and quite frankly I believe that we go much higher than that. It is not until we break below the 1.06 area that I feel that this market can be sold. Right now, I think it’s going to be more of the same, and now that we’ve had this fairly significant dip, this market could be ready to head higher on its next leg up.