The US dollar fell again against the Canadian dollar as the oil inventory numbers came out much more bullish than anticipated. Because of this, the market is likely to continue seeing downward pressure and an eventual breaking of the 1.23 handle. If we break down below there, then it is likely that the market will go looking towards 1.22 handle. Keep in mind that this pair is very sensitive to the price of crude oil, but it is also very choppy due to the fact that both of these economies are so highly intertwined. As long as that is going to be the case, it is a very difficult to get overly aggressive in one shot. Rather, you are much better off looking at this through a trending aspect and following it.
The fact that we are closing at the very bottom of the candlestick does suggest that we will have further momentum to the downside, so I do not have any interest in shorting. Rallies at this point will get sold into, especially with the 1.24 level above offering short-term resistance. After that, then we have the 1.25 level, which is a large, round, psychologically significant figure. The 50-day EMA is starting to reach down towards that area, which will come into the picture as well. We attempted to make the so-called “golden cross”, but we have failed to actually make that happen, so that is now off the table.
The 1.20 level underneath is still a major support level, and I do think that it is going to be difficult to break down through there. That being said, though, the market has seen a lot of value come into this market every time we rally, due to the fact that the Canadian dollar is so highly prized. Furthermore, we also have the market looking at the 1.20 level as a major support level on the longer-term charts, so breaking down below there could unleash quite a bit of havoc. That being said, I still prefer to fade rallies, and simply ride the overall downward trend that this market has been in for the last couple of weeks. We have had a nice rally, but we gave up that recently, and it certainly does not look like it is going to change anytime soon.
