Potential signal:
- Although unlikely in the immediate term, a break above 1.45 has me buying this pair, with a stop at 1.44 below.
- The target would be much, much higher.
- Perhaps as high as 1.50 over the longer-term.
The US dollar pulled back just a bit against the Canadian dollar during the trading session on Friday, but it should be recognized that we were a little overdone at the moment. So, this pullback doesn't necessarily mean anything has changed. Rather, it probably suggests that we have traders out there willing to take their profit into the weekend and just exit the market.
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After all, this weekend, it's hard to tell what's going to happen, but there's a very real chance that we have a situation where Trump could tweet something and cause the markets to go ballistic at the open. So, in that environment, you do not want to be involved if you can avoid it. On a pullback, I expect the 1.43 level to be supported as it has been in the past and the certain amount of market memory, I think, definitely needs to be watched.
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But more important than that, I think you also have the 50-day EMA there, which for the most part has been fairly reliable. If we were to break down below the 50-day EMA, then the next support level is the 1.42 level, which is an area that has proven itself recently as being supported. On the upside, we have the 1.45 level, and breaking that, of course, enters essentially new territory. We did get that break higher, but that was due to the tariff announcement and then the subsequent pausing of the tariff just blew all that out. So we'll have to see how that plays out, but I do think that if we were to break above 1.45, it will be very interesting for traders to take a look at that as a potential sign that it is higher on the next leg, but I don't know that it's going to be easy to break above that level without some type of fundamental reason. Because of this, I think we're entering into the same type of trading action that we had before the tariff announcement.
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