USD/CAD down 44 pips to 1.2546

USD/CAD down 44 pips to 1.2546

I think there's a big opportunity in USD/CAD as the fundamentals and technicals begin to align.

On the fundamental side, there's a raging energy rally ongoing. The last time crude was up here, the loonie was much closer to parity with the US. One of the reasons that isn't happening yet is because investment in the oil patch is still dead but if prices go high enough that will change in a hurry.

Secondly are the economic knock ons for Canada. The BOC will be at the forefront of any global rate hiking cycle.

Thirdly is that Trudeau won another government and is talking about extending business and personal pandemic benefits that were set to expire this month. The spending has reached irresponsible levels but the market will reward the growth it generates rather than punish the debt (that will be for another day).

On the technical side, the chart shows the breakdown of the recent uptrend today, which is also the break of a minor wedge and consolidation pattern. It also looks like a big head-and-shoulders pattern with a target of 1.20.