The US dollar has fallen a bit against the Canadian dollar during the trading session on Thursday to break down below the 1.22 handle. This is a very negative turn of events, and the fact that we are closing towards the bottom of the range does suggest that we are going to more likely than not see a continuation of the entire trend. At this point in time, I think that short-term rallies will continue to offer selling opportunities, and clearly the 1.24 handle is an area of previous support that should now be massive resistance. Nonetheless, the Canadian dollar is getting a boost for a multitude of reasons.
One of the biggest reasons the Loonie is taking offense the fact that commodities have been rallying for some time, and of course the Canadian dollar is a significant commodity currency that is very sensitive to the risk appetite of futures traders. Ultimately, the crude oil markets have a major influence but even more importantly the fact that the Bank of Canada has suggested that they were going to start tapering sooner rather than later, which of course is very bullish for a currency.
On the other side of the equation, you have the US dollar which is being printed massively and of course the US government willing to flood the economy with tons of stimulus. Spending $6 trillion in the first couple months of his presidency, Joe Biden has accelerated what has been going on for decades. Because of this, it is very likely that the US dollar will continue to suffer, and as inflation picks up it is likely that we will see the greenback continues to struggle.
The size of the candlestick is rather long, so this suggests that we have a bit of an acceleration of this market, and with the jobs number coming out on Friday it is very likely that we will see a lot of volatility. If we get some type of pop to the upside, I will be looking for signs of exhaustion that I can start fading again. If the market were to break above the 1.24 level though, I would be looking for a bigger move, but at this point in time I am simply fading signs of exhaustion after rallies or selling on a breakdown below the bottom of the range.