- The US dollar strengthened against the Canadian dollar near a long-standing support zone.
- Direction hinges on broader dollar momentum and Federal Reserve expectations, with choppy conditions likely between key technical levels.
The US dollar has rallied quite nicely against the Canadian dollar and, quite frankly, has done fairly well against most currencies around the world at the moment, at least for the day, but I find this a particularly interesting setup because the 1.3750 level is an area that's been important multiple times, going back to basically the beginning of May. So, it's not a huge surprise to see a little bit of a bounce from here. The question is, will this pair continue to the upside? I think there will be a lot of questions asked about this area.
Dollar Momentum and Key Technical Levels
I need to see the US dollar pick up a little bit more momentum, not only here, but in other currency pairs. After all, the dollar tends to move in the same direction across the Forex world. So, this pair should be indicative of what's going on in the Euro dollar or the pound dollar currency pairs. A breakdown below the 1.37 level opens up a move down to 1.36 if we do see continued US dollar weakness.
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A lot of what's going on here is that the Federal Reserve is expected to cut rates going forward. And while Canada is essentially in a holding pattern, the reality is nobody really knows what the Fed is going to be doing. Inflation in the United States has been a bit sticky, so they may stay hawkish longer than anticipated.
This pair does tend to be very choppy, and therefore bouncing around between 1.3750 and 1.40 isn't the craziest idea. I do see a lot of resistance just above the 1.38 level, but clearing 1.3850 then I think brings in more FOMO to the upside.
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