The US dollar rallied to kick off the trading session on Monday but ran into way too much resistance to continue going higher. By doing so, we did end up forming a bit of a shooting star, whch is a relatively negative sign. If we turn around and break down below the bottom of the candlestick for the trading session on Monday, then I think we will go lower, perhaps reaching down towards the 50 day EMA.
Keep in mind that we took off during the trading session on Monday and that helps the Canadian dollar, so as long as oil continues to soak plenty of strength, there is a really good chance that we will continue this lackluster performance over here. If that is the case, then we could start to see a rather big move based upon what I am seeing in the oil market. After all, oil had gotten hammered based upon omicron fears, and what that was going to do as far as shutting down the economy. Now that it appears we are going to not have a bunch of lockdowns due to omicron, demand for oil should be priced back into the market.
Having said, if we break above the top of a shooting star for the day, that is a pretty good sign which could send this market looking towards the 1.30 handle. The 1.30 handle is a large, round, psychologically significant figure, and an area where we seen a lot of resistance previously. If we can break above there, then the market can really start to enter more of a “buy-and-hold” type of situation. That being said, I do not necessarily think that is going to happen, but it is something worth keeping an eye on.
Expect a lot of choppy behavior due to the fact that we are going to be struggling for liquidity. On top of that, this pair does tend to be choppy anyway, due to the fact that the two economies are so highly intertwined. With all that being said, I am not looking for big moves, but I do have a couple of triggers that I just mentioned that I could use as a short-term trade in this market. I of course will also use oil is a bit of a guide as well.
