The US dollar initially fell against the Canadian dollar on Friday but then turned around to show signs of strength again. The US dollar has been hammering the Canadian dollar for a while, in a very choppy and noisy fashion. The market breaking above the 1.27 level is a good sign, and it is likely that we could go looking towards the shooting star above that has caused the most recent pullback.
The candlestick is closing towards the top of the range for the day, suggesting that we are going to see some follow-through. This is particularly interesting considering that the crude oil markets have shown signs of resiliency, which suggests that perhaps this has something to do with Canada itself, and not the crude oil market. The US dollar has also been strengthening against other currencies, so this comes down to a very interesting aspect, perhaps interest rate differentials. That is something that we have seen across the spectrum, as the Forex markets have been favoring the US dollar more than anything else as of late.
When you look at this chart, the 200-day EMA sits just below at the 1.26 handle, with the 50-day EMA trying to cross that in order to form the so-called “golden cross.” There is also the uptrend line underneath that holds support as well. If we get any type of pullback, it is likely to be a buying opportunity. The 1.30 handle above is my target, but it is can it take some time to get there. That is not overly surprising though, because the market does tend to be very choppy.
The market continues to be noisy not only due to the fact that the interest rate differential has been all over the place, but also because we have external influence coming from the oil market. In addition, the Americans and the Canadians have such intertwined economies. The inability to separate the two economies is part of why this pair tends to be very choppy in general. The pair tends to trend in a slow and choppy manner, and it does look like we are continuing to try to turn things around for a bigger move.
