The US dollar bounced a bit during the trading session on Friday as we reached towards the 50-day EMA and the previous trendline that had been so important. Because of this, the market is likely to continue seeing a lot of noisy behavior in this general vicinity, because has ita lot of technical confluence in the same place.
With all that being said, I think this is a market that is worth watching, because we have bounced from a significant support barrier in the form of the 1.20 handle, and then peaked above the 200-day EMA only to fail again. Now it looks as if we are trying to hang on to potential support, and if we can then it would be a confirmation of the overall uptrend trying to kick back in. If it does, then it is very likely that we will see this market shoot back towards the 200-day EMA, and perhaps even clear the most recent high. If it does, then I think the downtrend is over and the US dollar will continue to go much higher.
Obviously, there is the well-known correlation between the Canadian dollar and the oil markets, so that is something worth paying attention to. Nonetheless, I do not necessarily think that you can count on that all the time, but it is worth noting that there has been a decided change in the overall attitude of this currency pair, and that is something that you cannot argue with. With that in mind, I think we are looking at a scenario that is probably tenuous at best, but given enough time, we will have to make a bigger decision and we should get a nice longer-term trade relatively soon.
If we break down below the 50-day EMA, then I think we will plunge towards the 1.20 handle rather quickly, but if we break down below there then I think the US dollar would get absolutely hammered against everything, not just the Canadian dollar. From what I can tell, this is more about the greenback then it is the Loonie, or the oil market for that matter. This is ultimately going to be a very noisy market, but it is only a matter of time before we can put serious money to work.
