USD/CAD Forecast May 3, 2017, Technical Analysis

The USD/CAD pair broke out rather significantly during the day on Tuesday, clearing the 1.37 level. Oil markets continue to struggle, so having said that it makes sense that the Canadian dollar suffers. The US dollar breaking above the 1.37 level was of course significant, but I think the real breakout was back at the 1.36 handle. That’s an area that had been resistive on the weekly chart so I certainly don’t have any interest in selling this pair, and it’s not only oil that starting to cause problems.
Cracks in the Canadian housing markets are starting to cause alarm in places like Toronto and Vancouver. I have seen firsthand the explosion in pricing of homes and construction in downtown Toronto and other boroughs like Oakville and North York. Because of this, it was obvious last summer that the Canadian housing market was getting overheated, and now we are starting to see some of the shadow lenders fall apart. This should continue to put significant pressure on the Canadian dollar, and oil markets falling at the same time of course are a bit of a double whammy. I believe in buying pullbacks in this market, and I have a target of 1.40 at the very least, and quite frankly would not be surprised to see a 1.45 print sometime this summer.
Having said all of that, there is also the other side of the coin. If we break down below the 1.36 handle, then I would be willing to sell this market. However, I see very little likelihood of that happening and I believe most of the market agrees with me. Buying on the dips continues to be the best way to play this pair, and the oil markets breaking down would of course be an accelerant.
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