USD/CAD Price Forecast – market continues to hang about the 1.30 level

The US dollar rallied a bit during the trading session on Tuesday, dancing around the 1.30 level. That’s an area that is important and a large, round, psychologically significant number, and as we have seen more than once, it’s likely that the market will continue to pay attention to this area. Beyond that, we have the oil markets which have been noisy recently, and now are starting to calm down a bit and think about its next move. That of course has a massive effect on this pair.

Interest rate differentials continue to favor the United States, so therefore I think we continue to see buyers jump into this market. We gapped higher at the open during the week, and that of course is a bullish sign. I think it’s only a matter of time before we break out to the upside, but if we were to turn around and break down below the 1.29 handle, that could unwind this market a bit further. On a break higher, I would anticipate that there is a lot of noise to overcome, so it’s not going to be an easy trade. At that point, I believe that the market goes to the 1.33 level above.

The volatility continues, so I would keep the position size is in this market a bit small, but longer-term I do think that we will favor the upside overall, and I believe that the added specter of the Canadian housing bubble will enter the market sometime later this summer.