The US dollar fluctuated during the trading session on Wednesday to show a bit of stabilization near the 1.26 handle. Looking at this chart, you can see that there is a significant trend line just above that is also followed by a 50-day EMA. That is resistance, but at the same time you have to keep in mind that the Canadian dollar is highly influenced by the crude oil markets, which are waiting on a significant announcement after the Thursday meeting of OPEC+. There has been a significant amount of whispering about whether or not the oil ministers will extend production cuts or if they will perhaps produce more. This obviously has a lot to do with the idea of supply and demand when it comes to crude oil, which directly affects the Loonie.
The US dollar is worth paying attention to as well, because it has obviously been in the headlines that the yields have been spiking in several of the Treasury markets. If that were to happen again, it is likely that the US dollar would show signs of strength. It is also worth noting that we have recently seen a vicious bounce in this pair, especially considering that the 1.25 level is an area that has been crucial on the monthly chart, so I do think that if we are going to turn things around, it will more than likely be in this area.
However, it needs a fundamental reason to turn around, and that would be interest rates and/or some type of move in the oil market. Oil markets are most certainly overbought at this point, so this lines up quite nicely, but we do have that resistance barrier to worry about in the short term. If we break above there, then we will more than likely look towards the 1.29 handle, perhaps even the 1.30 level. Breaking above that level would confirm a trend change for me and then I think a move much higher. That would almost be certainly predicated upon some type of massive shift in the oil market, but we should also keep in mind that recently the US economic numbers have been all over the place, so if the US does in fact look likely to continue to strengthen, that would make a bit of sense as well.
