- The USD/CAD initially pulled back a bit during the early trading session on Wednesday, only to turn around and show strength near the 1.36 level.
- The 1.36 level is an area that a lot of people will remember from the last several sessions, looks like we are trying to work our way toward the 1.38 level above.
- After all, the recent economic numbers coming out of Canada have been a little softer than expected, so that gives the Bank of Canada a little bit of cover when it comes to the idea of keeping monetary policy loose. We also must pay attention to the fact that oil does have a direct effect on the Canadian dollar itself.
The market has been consolidating for quite some time, with a 1.38 level above being a significant resistance barrier, while the 1.33 level underneath continues to be supported. The 50-Day EMA sits near the 1.3550 level, an area that has recently offered a little bit of a swing low and a bounce. Because of this, I think it’s probably only a matter of time before we see some type of attempt to solidify that.
Choppiness Ahead
If we were to turn out a breakdown below the 50-day EMA, then the 1.35 level is a target followed by the 200-day EMA. The 200-Day EMA of course is an indicator that a lot of people pay close attention to, and therefore I think it would cause quite a bit of noise in the market. The US dollar is obviously a safe currency, while the Canadian dollar is a commodity one. With this, you must pay attention to a lot of moving parts, but with all of the geopolitical tensions out there, it does make a certain amount of sense that we would see the US dollar fare quite well against commodity currencies and those with a little bit more in the way of volatility. If we can break above the 1.38 level, this is a market that could truly take off to the outside, allowing the US dollar to go toward the C$1.40 level over the longer term.
Choppiness could be expected, but I still think this has a little bit of a “buy on the dip” attitude, and probably will remain so in the near-term future.
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