The US dollar rallied against the Canadian dollar on Tuesday to break towards the 1.37 handle, and as a result it is likely that we will continue to see this market hang in the same consolidation and grind a bit higher. That being said, we are getting ready to form the so-called “golden cross”, which is a very bullish sign. Longer-term traders will continue to look at this as a potential opportunity, but at this point in time the market is likely to go looking towards the 1.29 handle.
The size of the candlestick is important, as it is much bigger when it comes to the body size of the candlestick over the last couple of days, and that is a bullish sign. Ultimately, the golden cross and the uptrend line both are coming into the picture at the 1.26 handle, which extends down to the 1.25 level. That entire area has been significant support for some time, so as long as we can stay above the 1.25 handle, it is likely that the market will continue to go higher.
If we were to turn around and break above the 1.30 handle, then it opens up the possibility of a “buy-and-hold” situation going forward, and it could make for a nice longer-term trade. That being said though, it is kind of interesting to consider that oil has been rising right along with the US dollar. This tells me that the market has a lot less to do with the correlation oil right now than it does to the interest rates rising in the United States. Because of this, the market is going to continue to take a look at this through the prism of the longer-term attitude, which seems to be more or less a “buy on the dips scenario.
However, if we were to turn around and break down below the 1.25 handle, then it is likely that we will see this market go looking towards much lower levels, perhaps the 1.20 handle over the longer term. This is a market that I think will continue to see more of a grind higher, but at this point it will continue to be noisy due to the fact that the interest rates are driving this market higher, but at the same time oil is trying to press lower.
