USD/CAD Forecast May 16, 2017, Technical Analysis

The US dollar fell significantly at the open on Monday, as the Russian and Saudi officials suggested that an extension of the OPEC production cuts was needed. That of course is a very bullish sign for the Canadian dollar, but ultimately, we want to see whether the market believes that. And the short-term, it seems as if oil markets are getting a bit of a boost, and that tends to drive this market lower. If we can break down a bit from current levels, which of course at the time of recording are 1.3650, I think that the market goes back down to the 1.36 handle. This was an area that was very important on the longer-term charts, and a breakdown below there would be very negative indeed. However, there’s also the possibility that the market remembers this area and the longer-term traders get involved.

Production cuts have not worked

Quite frankly, production cuts have not worked for any real length of time, so it’s likely that they aren’t going to in the future either. I believe that the longer-term traders are out there looking to pick up value below, and if we can stay above the 1.36 handle, I think that eventually they will get involved. If we break down below that level, the market should go to the 1.35 level underneath, which of course is a large, round, psychologically significant number as well. Either way, expect quite a bit of volatility as the oil markets will have to sort themselves out. Pay attention, if oil goes higher, this pair goes lower and of course vice versa. I still don’t like the Canadian dollar longer-term in general though, because I think Canada has much bigger problems than oil right now, namely the housing market.
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