USD/CAD: Short-Term Buy
USD/CAD, 4-Hour Chart Analysis
The pair has been trending lower ever since hitting a high in May near 1.38, as US economic numbers have deteriorated, the Canadian economy has been showing surprising strength, and global risk assets have been holding up well. The Bank of Canada is widely expected to raise its benchmark interest rate tomorrow, and that could spark a “sell-the-news” trade in the overbought Canadian Dollar.
We expect the uptick in economic activity to be transitory, while the continued weakness in the price of oil should also weigh on the commodity currency, while the USD will likely experience a counter-trend rally against the Euro, as the sentiment is extremely bearish towards the Greenback. These factors justify a short-term buy signal that could turn into a longer-term position, as a major trend change is also in the cards, especially if the stock market correction deepens.
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