It looks like we are going to go lower, but at this point I think you can probably count on a lot of choppiness as per usual, due to the fact that this is a market that behaves in that manner most of the time.
The US dollar fell again on Wednesday as the CPI numbers came out in line with expectations. It looks as if we are going to continue the move lower after a couple of very choppy sessions. This does not necessarily mean that we will break down immediately, but it is obvious that the 1.24 level is being targeted. If we can break down below that level, then it is likely that we will continue to go much lower, reaching down towards the 1.23 handle, followed by the 1.20 handle.
It is worth noting that the 1.25 level has offered a lot of resistance, so if we can break above there it could change things, perhaps opening up the possibility of a move towards the 50-day EMA above. It is starting to slope lower though, so it suggests to me that the momentum is starting to favor the Canadian dollar again, which should not be a huge surprise considering how much divergence there was between the US and the Canadian labor markets. Canada knocked the ball of the park while the United States came in lighter than anticipated.
For a while, it looks like we were going to get the so-called “golden cross”, but we have failed at that, and it now looks as if we are simply trying to figure out what to do next. The US dollar has shown itself to be wanting by the end of the trading session on Wednesday. After all, the dollar got pounded from all directions, not only in the currency markets but also in other places like gold. If that is going to continue to be the case, then the Canadian dollar will be a bit of a beneficiary from this, due to the fact that we have seen so much in the way of crude oil strength as well. Remember, the Canadian dollar is highly levered to the crude oil market, so it all kind of works itself out in the same scenario. With this, it looks like we are going to go lower, but at this point I think you can probably count on a lot of choppiness as per usual, due to the fact that this is a market that behaves in that manner most of the time.