The US dollar was very quiet against the Canadian dollar on Monday, as it was Labor Day in both the United States and Canada, thereby sapping a lot of the liquidity out of the market. After all, this is a currency pair that is done with a lot of cross-border payments more than anything else, as the two economies are so hugely intertwined.
Looking at the chart, you can see that we have been hanging about the 50 day EMA for the last couple of days, and even though we tried to rally just a bit during the trading session on Monday, quite frankly there just was not enough volume out there to move the market for anything significant. Furthermore, the oil market was a little bit of back-and-forth action but would have suffered at the hands of a lack of liquidity as well. In other words, there was no real reason for the market to go bullish or bearish for an impressive move. That being said, I think a lot of this comes on what happens on Tuesday more than anything else.
At this point, if we clear the bottom of the candlestick from the Monday session, then I would be a seller of this pair, because that would obviously be very negative turn of events. However, if we did turn around and break above the top of the candlestick from the trading session on Monday, we could go challenging the 1.26 level above. If we can break above there, then it is obviously a very strong sign. However, you can see that we are most decidedly “slanting” towards the downside and therefore I think we are probably looking at a market that is easier to sell than it is to buy.
The US dollar itself might be a little bit oversold, but there is nothing on the chart for the Monday session that suggests that we are ready to go to the upside. That being said, if we do turn around and break out, it would be an obvious bullish move, as we would see a lot of sellers get turned upside down for the last couple of days. At the end of the day, I think that the Tuesday close could give us quite a bit of information that we can trade based upon.
