Loonie nearing bottom of its long-term range

NEW YORK (Forex News Now) – For the range-bound trader, the USD/CAD pair has been a delight for the last year or so. FX traders love a predictable currency pair, and have found one in the USDCAD.

The pair has been stuck between “parity” and the 1.07 handle since the latter half of 2009, and simply cannot gain traction to get either above or below the out barriers of the above mentioned range.

For FX traders, this is akin to playing a game of “ping-pong”, buy at 1.000 and sell at 1.0700. Set ups like these should be considered working until they stop. It really is that simple, as there have not been any significant signals in the inside of the range to show us future direction.

One thing that FX traders are often guilty of is not paying attention to the correlating markets to certain pairs. With the USD/CAD pair, this market is often controlled by the demand for oil in the United States. It is a simple correlation, as Canada produces oil, and the U.S. is its largest customer several times over.

Often, future direction of the pair isn’t found in the chart of the pair itself, but to be found in the oil markets. FX traders that intend to trade this pair should keep an eye on oil as well, as it can give you a “heads up” on the potential future direction of USD/CAD. It should be noted that the front month for oil looks the same as the USD/CAD does, only inverted.

Canada’s largest problem is the U.S., and not any internal issues. The economy in the United States is weak, and as such, demand for all Canadian imports is low. This in turn slows down Canada’s economy. It is almost as if we are in a nasty feedback loop.

Unless the U.S. economy either picks up, world demand for crude oil spikes, or the Fed does something truly surprising this week, this pair could remain a range traders delight.