US dollar struggles against Canadian dollar on Wednesday

The US dollar struggled a bit against the Canadian dollar after initially trying to rally on Wednesday, as the 1.26 level brought in fresh selling. Remember that the crude oil market will have a definite effect on the Canadian dollar, so if it can strengthen a bit, it’s very likely that it will push this pair lower. A breakdown to the 1.25 level looks to be likely at this point, and I believe that it is only a matter of time before we test that area. Whether we can get through it might be a different question, could certainly there will be psychological importance placed upon that round number.

In the short term, I suspect that selling rallies that show signs of exhaustion will continue to be the way to play this market, as there is more than enough reason to think that the downtrend should continue. Ultimately, as there are tensions in the Middle East, this should continue to keep the price of crude oil somewhat elevated, and therefore as a proxy the Canadian dollar will strengthen with Canada being such a large exporter of crude oil.

If we were to break down below the vital 1.25 handle, I think the market could go much lower at that point. I don’t expect to be able to do it right away though, and I anticipate that it will take several attempts to break down through that handle. Once we do, my next target would be 1.2350 below, and then probably the 1.20 level longer term. As for buying, we need to break above the 1.2650 level to consider the possibility.

USD/CAD Video 19.04.18