The US dollar fluctuated on Tuesday as we continue to bang up against the 1.28 handle. The Canadian dollar has been very choppy in general, as we have been trying to change the overall trend. At this point, if we can clear the 1.30 level it is very likely that it will kick off a longer-term “buy-and-hold” type of situation.
What I find particularly interesting is that this pair has broken away from the idea of following oil, so you need to be very cautious about that as well. With that being the case, the market continues to see a lot of the same choppiness that we had seen before, but it is obvious that the area just above had ran into a bit of a brick wall previously, so we need to clear that shooting star from August 20 to pick up real momentum.
If we can do that, then the market is likely to continue going towards the 1.35 handle, which is a large, round, psychologically significant figure that a lot of people would be paying close attention to. Furthermore, we will have had the so-called “golden cross” form at that point, so a lot of longer-term traders would be paying attention to that as well. That being said, I think that a pullback from here does make sense, as there are plenty of buyers underneath willing to pick up momentum. At this point, I have no interest in shorting this pair, at least not until we break significantly below the 1.25 handle. For what it is worth, the 1.20 level underneath has been massive support on longer-term charts, so we should see that area potentially offer a longer-term bottom. In fact, when you look at the monthly chart, you can see that the 1.20 level has been important multiple times.
At this point, the question is whether or not we have changed the overall trend. Right now, I would have to say it looks very likely that we are going to see an uptrend for the next several months, despite the fact that crude oil continues to perform relatively well. At this juncture, I remain a “buy on the dips” trader.
