- In my daily US dollar versus Canadian dollar analysis, it's obvious that we have a lot of support underneath near the 1.36 level.
- The 1.36 level has been important multiple times in the past, as it has been both support and resistance, so I would anticipate a lot of market memory here.
- Furthermore, we are between the 50 day EMA above and the 200 day EMA underneath.
With this being the case, we are essentially in an area where you would expect to see a lot of noise. If we can rally from here and break above the 50 day EMA, then I think the US dollar could very well go looking to the 1.3750 level, possibly even the 1.38 level. This would obviously be very pro-dollar, and it is a situation where you could see a big “risk off” scenario not only here, but worldwide as well.
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On the Downside…
On the other hand, if we were to break down below the 1.36 level and the 200 day EMA, we might drop down to the 1.3550 level. Keep in mind that we have the consumer price index and the producer's price index numbers at the end of the week. So that could have a major influence on the US dollar. The interest rate differential does favor the US dollar, but it's not huge, like it would be against something along the lines of the Japanese yen, but it does favor the upside in general.
All things being equal, I think we stay in this overall range and therefore not a whole lot to do if you're already long. However, at this point in time, I think you have to look at USD/CAD as a short-term market followed by maybe a market that's going to make a much bigger decision at the very end of the week. Expect a bit of slow trading, followed by noise at the end of the week as traders will be focusing on the idea of what the Fed may or may not do at this time.
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