The US dollar fell a bit during the trading session on Wednesday to reach down towards the 50-day EMA, but then turned around to show signs of hesitancy. The 50-day EMA is a technical indicator that a lot of people pay close attention to, so it should not be a huge surprise that it offered a little bit of support. That being said, if we break down below the 50-day EMA, then it is likely that we will go looking towards the 1.22 handle, followed by the 1.20 level again.
The crude oil markets have pulled back from extreme highs as we continue to get headlines when it comes to the Iranian nuclear deal and the inventory figures. With this, there are a lot of questions right now as to whether or not the US dollar can turn things around, or whether oil will take off to the upside, thereby sending strength into the Canadian dollar.
The 1.25 handle above is a major barrier, and the fact that we did try to reach towards that area only to give it back up tells me that it would take a lot of work to get above there. Because of this, the market is likely to be very choppy over the next couple of sessions, but we need to pay close attention to interest rates, oil and any new Fed speak. After all, the Federal Reserve has recently shown itself to be somewhat hawkish, so that is a new look for the Forex traders out there to take in.
Crude oil markets may have gotten a little overbought, so it would not surprise me to see this pair bounce a bit only to find sellers above. There is talk of some of the larger peripheral OPEC countries trying to increase the output of crude oil, so it does make sense that the price may have a little bit of volatility. Nonetheless, there is an extreme amount of demand coming back online as we have seen a major reopening of the world’s economy and had a serious glut of crude oil worked through during the reopening situation. We are still very much in a downtrend in this pair, but breaking above the 200-day EMA could change things quite drastically.
