The US dollar went back and forth on Tuesday as we are hanging about the 50-day EMA, as well as the 200-day EMA. These are a couple of moving averages that have been relatively flat lately, and now that we are at that area, it is worth noting that the market is going to continue to pay close attention to the crude oil market because the Canadian dollar is so sensitive to that market.
The 1.25 level underneath should continue to be supported, as it has been massive in its importance over the last several months. We also had formed a massive hammer in that area, so it shows just how interested buyers are in that area. On the other hand, it is worth noting that the 1.29 level above is a major resistance barrier, and as we have gotten rather close to the middle part of the range, it does make sense to see the market stay in this area. If we can break above the 1.27 level, we could likely go much higher, perhaps reaching the top of the range yet again. On the other hand, if we were to break down below the bottom of the candlestick, then we may have to revisit the 1.26 level, followed by the 1.25 level.
This pair does tend to be very choppy overall, which makes sense considering that the two economies are so intertwined. It is the largest land border in the world, and it has a significant amount of trade going across it. Because of this, the two currencies are traded back and forth quite extensively, making it not only very liquid but also somewhat contained in general. It is not until we break out of this range that I would look to place a bigger position, and as the market has been so tight in this area, I think it is probably only a matter of time before we see another attempt to break out, but as long as we stay here, I think a nice range-bound trading system will be the best way to handle this very lackluster currency pair from a longer-term standpoint. Be cautious, but I do think a small range-bound trade should continue to be the way forward.
