The US dollar initially tried to rally against the Canadian dollar, but just as it did on Friday, the market saw quite a few sellers come back into the market and push it lower. With that being said, the market is also likely to continue to hear a lot of noise in general, and it should be noted that we have broken down through a major support level recently. What's even more interesting is that every time we rally, the sellers come back in and punch the buyers right back in the face. Because of this, it is very likely that we will hear a lot of noisy behavior, but I just do not see a scenario where we start to rally for any significant amount of time.
When you look at the longer-term charts, it is very possible that we are taking a look at the 1.20 handle as a potential target. I like the idea of fading short-term rallies as they come, and you have had a couple of opportunities over the last couple of days. At this point, though, the 1.24 handle is an area that should be massive resistance. That is an area that previously had been significant support, and the 50-day EMA is racing towards that level. Because of this, I think there would be enough technical interest in this market to start selling it off again. This will also get a bit of a boost if we see crude oil rally as well, which is a major influence on the Canadian dollar.
On the other hand, if we did see a sudden sell-off in crude oil, this could be the first place where we would see a massive rally. It is not that I have no scenario in which I would be a buyer, but we need to break above the 1.26 handle to even consider that. If we do break above there, then I will have to look for some type of pullback and retest to get involved again. It is obvious that we are in a downtrend, and the US dollar is on its back feet, so it certainly makes sense that we continue to drift lower. As these two economies are the large trading partners of each other, it is not a surprise that the market is so choppy.
