- The US dollar initially tried to rally against the Canadian dollar during early trading on Thursday but has given back quite a bit of the gains.
- By doing so, we have fallen to test the 1.35 level, a large round figure that of course will attract a certain amount of attention underneath there.
- At that point in time, you would have to assume that there will be a certain amount of value hunting involved in the market.
We also have the 200 day EMA as well as the 50 day EMA, so there are plenty of technical reasons to think that people might be involved with this being the case. I think you have a setup that allows the market to be very choppy and it does make a certain amount of sense considering that oil is somewhat all over the place.
Furthermore, we have to ask questions of the Federal Reserve and what they are going to be doing this year and eventually they are expected to cut rates. The bank of Canada is expected to cut rates as well as they have already finished their hiking cycle, so that has helped the greenback. That being said, there was one errant comment recently about how rate hikes might not be done in Ottawa, but the economic indicators haven’t backed up that idea.
Killing Time?
But at this point it looks like the USD/CAD pair is just simply killing time between the 1.34 level on the bottom and the 1.36 level on the top. This is a range that we've been in before and it's essentially the fair value area of the larger consolidation region between 1.31 on the bottom and 1.39 on the top.
Ultimately, this pair does tend to be very choppy due to the fact that both of these economies are so highly intertwined. But right now, I suspect that after the impulsive candlestick on Tuesday, the US dollar probably has a slight upper hand on the Canadian dollar. If we can break above that 1.36 level, then we probably have the possibility of moving another 200 pips, maybe even 300 pips to the upside. A breakdown below the 1.34 level could then open up a move down to 1.3250, but at this point we are light years from that happening.
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