The US dollar has pulled back again during the trading session on Thursday against northern counterpart. The Loonie has been a bit oversold as of late, so this is not a huge surprise. The question now is whether or not this is going to be a simple correction, or is it going to be something bigger? A lot of this could come down to the oil market as per usual, but there are also other things that could move the Canadian dollar.
Keep in mind that these two economies are highly intertwined, so that is why quite often this market tends to be very difficult to trade. However, it appears to me that the pullback from the 1.30 level was very deliberate, but I do not necessarily know that it means we are changing directions again. As things stand right now, it simply looks like we are chopping along and try to butt up the necessary momentum to break out to the upside. If we can clear the 1.30 level on a daily candle, that would be a very bullish sign and could send this pair much higher. It is worth noting that we bounced from the 1.20 level, an area that has been crucial on longer-term charts. The question now is whether or not we are actually going to try to revisit that? I highly doubt it at this point.
That being said, the 50 day EMA is where I draw a line in the sand, and as long as we can stay above that I think you have to be looking for buying opportunities. It currently sits at the 1.2677 level and is rising quite rapidly due to the extreme momentum that we had seen in the market over the last several weeks. For what it is worth, oil does look a little bit tired at the moment, but with the lack of liquidity in the markets, you cannot read too much into any of these moves over the next couple of days. For me, this is all about the 1.30 handle and whether or not we can break above it. If we can, then it becomes a “buy-and-hold” type of market that I will look for opportunities to add to. I suspect that probably comes sometime in early January, perhaps after the nonfarm payroll numbers.
