The USD/CAD initially dipped a bit during the trading session on Tuesday but found enough support near the 1.34 level, as the Canadian dollar did not seem to pay much attention to the fact that oil recovered. In general, the US dollar was stronger during the session against multiple assets, so this one ended up being no different, despite the fact that most traders will look at it as a proxy for oil.
Now that we are above the 1.35 level again, it does look like we’re going to try to continue to take off to the upside, perhaps trying to reach the 1.38 level. However, you should keep in mind that the market will continue to be noisy, and of course, these two currencies are widely traded back and forth as they are each other’s number one trading partner. In other words, it does tend to be choppy over the longer term so it is worth considering when taking a look at the market.
Choppiness Ahead
- If we were to break above the 1.38 level, then it’s possible that we could send this market much higher, perhaps allowing it to go as high as 1.40 over the next several weeks.
- There are a lot of things going on this week that will have people paying close attention to the US dollar, especially through the prism of inflation in the United States.
- After all, the Core PCE numbers coming out on Thursday are by far the Federal Reserve’s favorite measure of inflation, so people will be paying close attention to how that number comes out.
- Furthermore, you also have to keep in mind that the jobs number comes out on Friday, and that could give us a bit of a heads-up when it comes to labor inflation.
If we were to turn around a breakdown, it’s possible that we could drop below the 1.34 level, sending the market down to the 1.3120 level. The 200-Day EMA sits just above that level, so of course, that would come into the picture and perhaps attract a little bit of training. Regardless, this pair will be choppy as usual so it’s not necessarily a market that I’m looking for an explosive move in but if there is going to continue to be a lot of concerns about oil demand, they can’t be a good thing for the Canadian dollar.
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