The US dollar has rallied significantly against the Canadian dollar as traders came back to work on Tuesday. Yes, the market was open on Monday but considering that most of the transactions in this currency pair are done during North American trading hours, it is Tuesday that matters, not necessarily Monday.
As you can see, we have crossed the 200 day EMA yet again, and are testing the previous uptrend line. It certainly is interesting to see that we have tested this level as resistance, and at this point in time I think it is becoming obvious that something big is about to happen. This is a market that has been chopping around sideways in listlessly for a couple of weeks, and now we are trying to figure out whether or not the market continues to try to rally like it had over the last several months. Breaking above the 1.2650 level could kick off more buying, as it would be a major turnaround in the short term.
The market had seen a lot of support between the 1.25 and the 1.26 level, and that has held as things stand right now. The candlestick during the trading session on Tuesday was very strong, so that does suggest that perhaps there is real buying pressure. It should be noted that the US dollar rallied against almost everything during the day, and as interest rates in America start to drop, that could signify that people are running back into the bond market. The bond market auction for the three year duration had stellar foreign bids during the trading session, so that could also be part of what we are seeing here. If we can break above that high near the 1.2675 handle, then it would be a significant break of resistance, perhaps allowing this market to go much higher.
Keep in mind that this pair is highly sensitive to the crude oil markets, it is worth noting the crude oil did of course take a little bit of a beating during the trading session. There is a downtrend in crude oil that has worked against the value of the commodity for a while, so it will be interesting to see if that continues to show negativity, because if it does and that will almost certainly send this market higher.
