Editor's Comments:

Experts confirm bullish Canadian dollar versus U.S. dollar for 2022.

In my forecasts from my crystal ball for 2022 I predicted that inflation would increase significantly around the world and it has.

In fact it's the highest level since 1980 when we had the Arab oil embargo which by the way I made a lot of money on buying gold, silver, and platinum.

When inflation increases central banks throughout the world are forced to raise interest rates. 

This will be bullish for the Canadian dollar which I have been bullish on for quite some time now.

Those who follow my predictions on my daily Facebook posts are well aware that I've been in and out of the Canadian dollar versus the U.S. for quite some time.

Also the Canadian dollar does really well when oil prices are increasing, which they have around the world almost consistently.

If Russia acts on it's threat and invades the Ukraine in the coming weeks oil prices will explode along with the Canadian dollar.

But that's not the main reason to buy the Canadian dollar.

The main reason is the United States has gone bankrupt. 

When Trump took office the national debt was $19 trillion now it's close to $30 trillion and they just keep on printing money.

 

If you look at this chart printed this day you can see that the United States for example has three times the debt that China has. 

Think about countries as businesses and if they owe a lot of money the amount of interest on that money sooner or later will bankrupt them.

Rome thought they were invincible as well. Germany felt it when they had hyperinflation in the early part of the 1900s  which led eventually to a dictator and the destruction of Germany.

Maybe US citizens don't care that every baby born in America is automatically almost $90,000 in debt.

If I was American tax payer I would be concerned because maybe I have financial statement has a home worth 1/4 million dollars but I owe 240,000 as my share of the national debt.

 So who cares  people will continue lend money to the United States. Or will they?

The main reason the United States has been the best place to store your money the last hundred years or so is because they were strong economically .

As shown below the countries that hold the largest amount of debt in America treasuries is Japan and China.

 

Surely both those countries are watching how much the U.S.A. is going in debt and are concerned.

With China you also have the problem that they are constantly batting heads against America.

More recently with banning companies such as Huawei because they didn't like the fact that they were so far advanced in 5G technology. Which by the way the United States did so bad on the launch last week  they actually shut down airlines because they were concerned about safety.

All you need is one major confrontation in the South China Sea with America or through the Taiwan Straits and you may find China selling a lot of its holdings in treasury T-bonds and  T-bills.

Then where would America borrow money?

I've been around 50 years in business.

 I've been very successful but I've also made a lot of mistakes on my way,

One thing I've learned is never to have a large amount of debt.

I believe that unless a miracle happens the United States is heading down a road towards financial bankruptcy and will become 1/3 world country the very near future if they don't come up with some leadership that can change this all around.

But even if they do you have 38% of the American electorate who still believes Donald Trump who tried to orchestrate a coup d'état in Congress last year was robbed of the election win.

 You may want to call U.S. dollar the bitcoin of the currency markets in that the only reason it goes up is because of a unfounded belief that the U.S.A. economy is strong just like those who believe bitcoin which  has dropped over 40% recently is strong .

 At this point forward  I am actually not invested in Canadian dollars other than my savings.

There will be technical bear market rallies which I will short every time until I feel there is a major change in the overall trend.

Those of you in on Bali be aware there are some banks that actually offer Canadian bank accounts.

As it says in this article below this week there will be strong tests of technical levels and of course all bets are off if Russia does invade the Ukraine.

Canadian Dollar Technical Forecast: Bullish

The Bank of Canada is expected to hike rates next week on the morning of the FOMC rate decision, making for an especially busy backdrop in USD/CAD.
USD/CAD put in a bounce this week after a month-long sell-off drove the pair to fresh lows. But a significant zone of resistance lurks overhead, and bulls are going to need to trade through this zone before topside strategies can become favorable in USD/CAD again. 

The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Advertisement

USD/CAD may have finally found some support after the sell-off that started a month ago sent prices below a number of key supports. In late-December, the pair was vying for a 1.3000 test for the first time in the calendar year of 2021 before sellers showed up at resistance around 1.2950. After a pause in the 2622-2672 support zone, sellers continued to push last week, eventually producing a fresh two-month-low in the pair.

Rising oil prices have certainly been a driver. But, Canadian economic policy has also played a role and this will be in the spotlight next Wednesday as the BoC holds a rate decision on the morning of the FOMC rate decision. This should make for an especially busy Wednesday outlay with rate decisions from each representative Central Bank.

In USD/CAD, this week was marked by some pretty strident defense of support at 1.2450, with an assist from the 1.2500 psychological level. Prices dipped below the big fig last Thursday and despite multiple tests over the past week, sellers were unable to make any ground below the 1.2450 level that’s currently functioning as the two-month-low in the pair.

This doesn’t mean that sellers are done, however, as a key zone lurks just above current price action and it’s the same zone that was in-play multiple times last year, spanning from Fibonacci levels at 1.2622 and 1.2672. In the middle of that zone is the 38.2% retracement of the recent down-trend, and this can add a bit more perspective to the picture, allowing for bearish strategies should resistance show in this zone.
USD/CAD Four-Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview
BoC v/s Fed – First Mover Advantage

There’s a strong chance of a rate hike out of the BoC next week while few, if any expect a similar move from the FOMC. For that, it looks like we’ll be waiting until March. In Canada, inflation similarly remains elevated albeit inside of the recent levels seen in the U.S.. Just last week Canadian inflation printed at 4.8% and this is further playing into rate hike odds out of the BoC.

The problem here is one of expectations, and with markets expecting a hike out of the BoC and no similar move out of the Fed, this can set the stage for a bullish move in the USD/CAD pair if the BoC disappoints, as they did in December.

For that – traders can look to bullish breaks of the 2672 level, which currently marks the top side of the resistance zone looked at above and that price is confluent with the bearish trendline taken from December and January swing highs.







Recommended by James Stanley
Get Your Free Top Trading Opportunities Forecast

Get My Guide
USD/CAD Daily Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

The forecast for next week will be set to bullish for the Canadian Dollar. However, given the intense focus that’ll likely be paid to both the US and Canadian Dollar around Wednesday’s rate decisions, traders may want to point that CAD-focus elsewhere.

One market of note that may be accommodative for that theme is CAD/JPY, which is nearing a major spot of support around the 90 psychological level. The pair broke out of a falling wedge to start the year and after a strong run in the first couple weeks of 2022 trade, CAD/JPY has pulled back and there remains support potential around prior resistance. I’m marking the zone from 90 up to the Fibonacci level at 90.25, and this would need to see a support test confirmed by a four-hour or daily candle close at that spot to keep the door open on the long side.
CAD/JPY Daily Price Chart

Chart prepared by James Stanley; CADJPY on Tradingview

--- Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.