USD/CAD Forecast July 18, 2017, Technical Analysis

The US dollar tried to rally a bit at the open on Monday, but rolled over again. I believe this market will continue to sell the rallies, as the Canadian interest rate differential with the United States should start to expand via the bond markets. There have been huge beds placed on Canadian rates rising while US bonds get shorted. Because of this, it looks likely that the monetary flow will continue to go north. Normally, traders will pay much more attention to the oil markets, but currently they are seeing a little bit of support anyway. Longer-term, they certainly look bullish and I see no reprieve for that, so I believe the market is trying to reprice the bond situation, and is essentially ignoring oil in the short term. Longer-term, I think oil being bearish overall will eventually weigh upon the Canadian dollar, so I think we will find a bottom below, I just don’t know where that is yet. I suspect the first significant area that could offer support is the 1.25 level, if for no other reason than psychological importance.
Selling rallies
I believe that the market will continue to sell rallies, so I’m looking for exhaustion after short-term rallies to take advantage of. I don’t wish to place any long-term trades at the moment, because quite frankly we have moved so far in such a short amount of time. Waiting for opportunity is half the game, and this pair will certainly follow those rules. I believe that the 1.28 level above is offering a complete “ceiling” in the market. If we broke above there, I would consider buying, but I don’t expect that to happen in the short term, so I look at this is essentially a “one-way trade.”