Potential Signal:
- If the USD/CAD can break above the 1.44 level, I would add to an existing position or enter a new one if I didn’t have one.
- I would have a stop loss at the 1.43 level, with a target of 1.45.
The US dollar has rallied against the Canadian dollar during the trading session on Wednesday, as we have seen a lot of noisy trading. However, it’s also worth noting that the US dollar has been fairly soft against most other currencies, and the Canadian dollar itself is in a little bit of a special set of circumstances. After all, there is a potential trade war brewing between these 2 countries, and that will be absolutely horrible for the Canadian economy, despite the fact that there could be a little bit of pain felt in the United States.
Political Turmoil?
I’m not real sure what’s going on in Canada at the moment, because it is a very fluid situation. However, it’s probably worth noting that the leaders of both Prince Edward Island and Newfoundland and Labrador have resigned in the last 10 days. Furthermore, Justin Trudeau is technically in a state of limbo, as is the parliament. Adding more fun to the mix is the fact that the president of the United States has stated that the tariffs on Canada go into effect on 4 March. This will be devastating to the Canadian economy, and unless there is some type of compromised reach, I suspect that the Canadian dollar will get eviscerated.
I also recognize that the technical analysis is very bullish for the US dollar, at least against the Canadian dollar, despite the fact that the US dollar is struggling against multiple other currencies. In general, if the market can break above the 1.44 level, I think that would be yet another barrier overcome, and the greenback will start reaching to the 1.45 level yet again. This is an area that has been important multiple times and was only broken when the tariffs were supposed to be enacted.
Since then, the market has been assuming that there will be some type of an agreement, but quite frankly I don’t think we are anywhere near one between the Canadians and Americans, and if that’s going to be the case, Donald Trump is more than willing to watch the Canadian dollar be lit on fire, something that I think is a very real possibility here.
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