USD/CAD forecast for the week of December 12, 2016, Technical Analysis

The USD/CAD pair initially rally during the week, but as you can see turnaround and formed a slightly negative candle. We are testing an important ultralight as well, so it looks as if we’re going to have to make some type of decision soon. This makes a lot of sense, as the OPEC and non-OPEC members are meeting over the weekend, it makes sense that oil markets will be very volatile. As you know, oil tends to dictate the value of the Canadian dollar longer term. As oil rises, the Canadian dollar strengthens and that’s what we seen over the last couple of weeks. However, if this talk produces no output cut, it’s likely that the Canadian dollar will fall rather precipitously, and we will continue to see the uptrend that’s been in place for several months.

I can also make an argument for a bit of an of trending channel but I also recognize that the 1.35 level above has been resistive and probably will be going forward. It’s not to say that we can break above there, we most certainly can but it may take a couple of attempts. I also recognize that a breakdown below the uptrend line is very bearish and of course I would have to start thinking about selling. The most logical place that the market would go from there is the 1.30 level as it is a large, round, psychologically significant number. The markets love those numbers, it makes a lot of sense that we would have a lot of stop loss orders there as well.

The Canadian economy itself isn’t exactly on fire, so I have to believe that most of this move if not all of it is based upon the price of oil. A lot of Canadian dollar traders use it as a proxy for the petroleum markets, and a proxy for the Canadian economy quite often will come far below in order of priorities. Either way, this next week should be very interesting for this pair and be a bit of a telltale sign as to where we go next.