The US dollar rallied initially during the session on Wednesday, but also gave up gains near the 1.27 level as well. This is the same thing we did during the Tuesday session, so it is worth noting that this is an area that seems to be seeing a lot of significant resistance. Whether or not this is a major selling opportunity is a completely different question, but it should be noted that the Canadian dollar will be acting quite a bit differently than some of the other currencies, simply due to the oil correlation.
If we were to break above the highs of the Tuesday session, that would obviously be a very bullish sign, and it is worth noting that we have had a strong push to the upside. However, it is that strong push to the upside that we had had over the last couple of weeks might be one of the reasons why we get this pullback setting out. Simply put, the market needs to build up enough momentum to continue the overall move, which makes sense. I believe that the 200-day EMA sitting at the 1.2570 level could be a target for short sellers, and an area where the buyers may come back into pick this market up.
On the other hand, if we do take out the highs from the Tuesday session, is very likely that we could go looking towards the 1.29 handle, which is where we had formed a bit of a double top back in the summer, and I think if we can break through that it would kick off a major uptrend. I think there will continue to be a lot of noise in this pair, which is quite normal for this market. After all, the two economies are very intertwined, so choppy behavior continues to be what one would anticipate more often than not. Because of this, I tend to build up positions very slowly in this pair, and simply follow whatever trend is following. At this point, I think the pullback makes perfect sense, but I do not necessarily know if it will continue for very long. It will be interesting to see what the oil influence will be, but keep in mind that it is Thanksgiving on Thursday and that will certainly have a lot to do with what we see.
