US Dollar/Canadian Dollar Monthly Forecast

US Dollar/Canadian Dollar Long Term Technical Forecast

I wrote last month that "the USDCAD break through its long term trendline strongly indicates that a long term bottom is in place. Former significant highs at 1.1882 and 1.2738 are bullish targets going forward." Both targets were met and if the corrective nature of the decline from 1.6194 suggests that the USDCAD will eventually exceed 1.6194 (this may take years though). A large correction of the recent rally would serve as wave 2 within the 5 wave impulse that began at .9055.

US Dollar/Canadian Dollar Fundamental Outlook/Interest Rate Forecast

The US Dollar-Canadian Dollar Interest rate differential is forecast to shrink dramatically in the coming 12 months, providing a bullish fundamental bias for the USD/CAD exchange rate. Markets predict that the Bank of Canada will cut rates aggressively in the year ahead-dealing a blow to the Canadian dollar. The US Federal Reserve, by comparison, will raise rates modestly and further compress the difference between US and Canadian yields.

In terms of interest rate differentials, traders predict that the US-Canadian yield spread will narrow by a whopping 179 basis points in the year ahead. Though the Canadian dollar has not necessarily been one of the most interest rate-sensitive currencies through recent trade, such a dramatic shift in yields may place further downward pressure on the CAD and force further USD/CAD rallies through the medium term.

Forex Sentiment and Positioning Outlook for the US Dollar/Canadian Dollar

Forex Futures Suggest USD/CAD May Continue to Rally

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