The US dollar rallied a bit on Tuesday, as it looks like we are trying to climb against the Canadian dollar still. This is a market that tends to be very noisy anyway, as the two economies are so highly intertwined. I still believe that the 1.3 level above is a massive resistance barrier that it is going to be difficult to get above, but it certainly looks as if the market has trying to take it out. The Canadian dollar is highly sensitive to the crude oil markets, but they do not necessarily always move in the same direction, so you have to keep that in the back of your head as well.
I think that over the longer term, if we can break above that 1.30 level, it is likely that we could go much higher, perhaps in more of a “buy-and-hold” type of scenario. That would probably see the US dollar strengthening against almost everything, so it would be interesting to see if that does in fact happen.
To the downside, the 1.2750 level is support, so if we were to break down below there then I think we will go looking towards the 50 day EMA, and then possibly down to the 200 day EMA which is just above the 1.26 level. Nonetheless, this is a market that I think is going to be noisy to say the least. The back-and-forth action I think is probably what you can count on between now and the end of the year, but we will have to really get an idea as to where we are going longer term once we get through the new year and start to see more money come back into the markets when traders put risk back on. This will be especially true after the jobs number, which both countries will be reporting at the same time in January. With all this, I expect a lot of choppy and noisy behavior, and short-term, range-bound trading will probably being the best way to deal with this market. The overall attitude of this market should continue to see a lot of erratic behavior, and the later we get in the year it is only going to get worse. Once we get that January number, then we can put more money to work.
