Forex Magnum


USD CAD – September Outlook

Autore: FX Empire Analyst - James Hyerczyk

The USD CAD bottomed at .9406 in July. When risk hit the markets because of the European sovereign debt crisis, theU.S.debt ceiling debate and theU.S.debt rating cut, investors dumped higher risk assets and flocked to the safety of the U.S. Dollar. This helped put in the bottom and contributed to the eventual breakout over the June swing top at .9912.

Usually a breakout over a swing top triggers a change in trend to up, but in this case it appears the breakout was event driven and not caused by a bullish shift in investor sentiment. Now that the U.S. Federal Reserve is once again suggesting stimulus to help boost theU.S.economy, traders have once again returned to risky assets, driving the USD CAD lower.

If the financial markets can remain calm and allow volatility to return to normal, then look for downside pressure to return to the USD CAD. With the Fed committed to keeping interest rates low until mid-2013 and it leaning toward additional stimulus in the form of quantitative easing, the U.S. Dollar is expected to remain under pressure.

Based on the monthly chart, this currency pair is likely to return to the bearish outlook it has experienced since early 2009. As long as theU.S.economy remains at risk and the Fed is willing to provide low interest rates and stimulus, look for the Canadian Dollar to remain the stronger of the two currencies.

Technically, 1.0009 or basically par is likely to remain resistance. The bottom at .9406 appears to be solid support also. This means the currency pair is likely to straddle the mid-point of this range at .9708 until the U.S. Dollar gets clear direction from the Fed.



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