The US dollar has pulled back a bit during the trading session on Thursday as the 1.31 level against the Canadian dollar continues to cause resistance. If we were to break above there, that would obviously be a very bullish sign for the greenback, and a negative one for the Canadian dollar. That being said, it’s worth paying close attention to the crude oil market, because the Canadian dollar is so highly levered to it.
While the US dollar pulled back, the crude oil markets recovered a bit during the day. However, it’s worth noting that the crude oil market, specifically the West Texas Intermediate Crude Oil market, pulled back from a previous uptrend line, suggesting that we may get a little bit of a pullback. It will also continue to have to pay close attention to the jobs number that is coming out on Friday morning, which will cause a lot of noise in the greenback.
Speaking of the jobs number, it’s worth noting that both countries will produce their jobs number at the same time on Friday morning, so this will be a particularly chaotic pair. Underneath, the 1.2850 level underneath will be supported, as the 50 Day EMA sits right there as well. Ultimately, this is a market that will continue to see a lot of noisy behavior, but if we were to break down below 1.28 at all, then it’s likely that we could go to the 200 Day EMA, possibly even the 1.26 level which is the bottom of the overall of trending channel.
If the oil markets do in fact break down, that might be the catalyst for the US dollar to finally break out against the Loonie. If and when it does, I anticipate that this market goes higher, perhaps reaching the 1.35 level over the longer term. Keep in mind that this pair is rather choppy, which makes quite a bit of sense considering that the cross-border traffic between the two countries is a massive amount of cash flow. Furthermore, the oil component against the greenback is not as strong as it once was, so that has mitigated some of the previous volatility. Regardless, it’s worth noting that when we pulled back, we did not go all the way to the bottom of the channel, so that does suggest that perhaps the buyers are becoming a bit more aggressive.
