Ever since the Bank of Canada (BoC) cut rates and flagged economic challenges as oil prices slid, it has been one-way traffic for the CAD. The CAD has weakened significantly and has been tracking the moves seen in oil prices.
USD/CAD has taken off and has been rising exponentially since squeezing through the $1.2000. The pair has now rallied to a high of $1.2677 and is deep in overbought territory. Coincidentally oil prices are also experiencing some short-term stability and this could result in some near term profit taking. As a result I will be looking to buy the pair on pullbacks.
Ideally the support zone in the $1.2400 region will present buying opportunities. This is a congestion zone and is also the 23.6% retracement of the rally from December 31 lows to yesterday’s highs. The fundamentals remain sound on the USD side of the equation with unemployment claims dropping to a 15-year low. This will keep the upbeat tempo around the economic assessment.