US dollar falls significantly against Canadian dollar

This chart is a perfect example of why trading around the computers is a fool’s errand. The algorithm sold off rather drastically during the session on Wednesday after the Bank of Canada included some hawkish tone to it statement. Ultimately, this is a market that is driven by computers in the short term, but longer-term we need to look at the potential interest rate moves of both central banks. For myself, I think it’s obvious that the Federal Reserve is still likely to raise interest rates much quicker than the Bank of Canada, although this does change the overall tone.

I believe that eventually we will see value hunters coming back in, because even if Canada does raise interest rates it was still be well below the rate as to the Federal Reserve expectations going forward. Eventually, the algorithms will stop trading this and we will get longer-term expectations expressed on the chart again. In the short term, it’s probably best to stand on the sidelines and let the machines do their work. Ultimately, I still think this paragraph higher, mainly because the oil markets are about to see more supply come on line, and that of course will work against the Canadian dollar. Whether we can break significantly higher might be another question altogether, but I think that the 1.2750 level underneath will probably hold as support.