- During the Monday session, we saw the US dollar initially fall, only to turn around and show signs of life and break to the upside.
- Ultimately, this is a market that continues to be very noisy, and I do think that it favors the upside.
- I'm also willing to recognize that we've got some work to do before we truly get moving to the upside.
If we can break above the 1.40 level on a daily close, then I think it opens up a move to the 1.41 level. The 1.3935 level seems to be an area of importance, and if we were to break down below there, it's likely that we will continue to see a lot of selling pressure down to the 50-day EMA.
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The market has been playing on the strength of the US dollar and with this being the case, I think you have to be very cautious about getting very aggressive one way or the other, mainly due to the fact that we have seen so much energy expended in this market that it wouldn't surprise me at all to see the market do what it can to build up a bit of a base in the meantime getting people comfortable enough with these higher levels. If we were to break down below the 50-day EMA, we could drop down to the 200-day EMA near the 1.37 level.
If We Do Drop
Anything below there, the bottom falls out, and we will probably see the US dollar falling apart. All things being equal though, I do think that the US dollar continues to attract a lot of safety inflows. The Bank of Canada has been extraordinarily loose with its monetary policy and its statements. So, I think we still look at the US dollar as probably being the stronger of the two currencies. I believe this will continue to be the case going forward.
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