USD/CAD Forecast May 22, 2017, Technical Analysis

The USD/CAD pair broke down significantly during the day on Friday, slicing below the 1.36 handle. This was driven mainly because of the oil markets rallying, and breaking above the significant $50 level. On the longer-term charts, the pair has rolled over and confirmed the top of a longer-term channel. The channel is still very much intact, but I think this market could continue to go lower from here, perhaps reaching towards the 1.33 handle. Obviously, there are a lot of things moving at the same time, but right now it appears that the market is paying more attention to oil than anything else. If that’s the case, and oil continues to strengthen, we should continue to see selling pressure. Currently, rallies should offer selling opportunities if we stay below the 1.36 handle, as the Canadian dollar shows real strength.

Crude oil and housing markets

The crude oil market of course will have the influence as I mentioned previously, but we also have a housing market issue in the Canadian economy. Ultimately, I think that this pair will continue the slow and long-term uptrend grind, but we are far from the bottom of the channel, so I believe we are simply going to reach race back to the bottom of it. Supportive daily candles might be an opportunity to go long, but until I see that I’m not interested in buying, unless of course we break well above the 1.36 handle with some type of certainty and length of time. Pay attention to headlines coming out of Canada, there is a significant amount of concern when it comes to lenders of housing, and if those become more of an issue, we could see this market turned around completely in a heartbeat.
As a side note, I will be in Toronto next weekend, and paying quite a bit of attention to all those cranes building in “The Six” as the overproduction of high and property continues. I believe longer-term the Canadian dollar is going to face serious problems, but currently it seems as if it is doing quite well.
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