Chris takes a look at the USD/CAD pair going into the week of June 18. With the recent volatility in the US dollar, and a bit of a “risk off” trade going into full effect, it makes sense that we see continued bullish pressure. However, OPEC has a significant meeting on Friday dealing with output cuts, and whether they will be lifted. Further downward pressure on the oil markets could send this market even higher, but quite frankly beyond that, we have a lot of housing issues in the greater Toronto area that could weigh upon the Canadian dollar as well.
The interest rate differential continues to favor the US dollar overall, which is nothing new but seems to be exacerbated recently by comments coming out of both central banks. With the Federal Reserve by far being the most hawkish of major central banks of the world, it makes sense that the greenback would continue to attract more flow. There is a lot of noise above, but we have recently broken above a major resistance barrier in the form of the 1.30 handle, and that should not be overlooked as it is a major win for the buyers.
In the meantime, he believes that the 1.30 level underneath will continue to offer a bit of a “floor” for the uptrend, as there is so much in the way of order flow just below. This pair does tend to be very choppy during the summer time, as the economies are so heavily interconnected. This is summer driving season in the United States, so that obviously brings down a lot of Canadian oil, which helps support the Canadian dollar. However, the United States is becoming much less dependent on Canadian oil, and that has changed the dichotomy of this pair over the last couple of years. In other words, the Canadian dollar could be in more trouble than we are currently seeing.
Below you find the video.