The US dollar fluctuated on Tuesday as the 1.26 level continues to offer a lot of interest as far as buying is concerned. This is interesting, because the crude oil market is waiting to figure out whether or not OPEC is going to increase production, and it is also worth noting that this is a market that has been trying to find its footing for a while.
If we can break above the top of the candlestick from last Friday, the market would more than likely go looking towards the 1.28 level, possibly even the 1.29 level. This is a market that has been hugging this trendline as well, so it is very likely that we would see choppy behavior, and as we head towards the jobs number, I think that things will only get worse. I do not necessarily expect to see a massive move immediately, but it certainly looks as if we are trying to change the overall trend right now. Further exacerbating the trend line is the fact that we also have the 50-day EMA underneath, which is offering support as well. I think there is a “zone of support” between the 1.26 level and the 1.25 handle, so as long as we can stay above all of that, I still have a bias to the upside, but I recognize that if you are in fact witnessing some type of trend change, these are typically messy affairs.
Keep a close eye on the crude oil markets because the Canadian dollar is significantly influenced by that commodity. Furthermore, we also have the 10-year yield coming into the picture as well, as the US dollar has been highly levered to what is going on in the bond markets. We also have the possibility of the 50-day EMA turning around and breaking above the 200-day EMA, which would be the “golden cross” that a lot of people pay close attention to for the bigger move. I think we will get a significant amount of impulsivity in this market soon, as we are winding up for a bigger move regardless of the direction at this point in time. The shape of the candlestick shows just how tight things are starting to get.
