- The US dollar attempted to break higher in early Wednesday trading, but with both countries releasing employment numbers on Friday, it lacked conviction.
- The US dollar attempted to rally early during the session on Wednesday, but has since turned around against the Canadian dollar.
- This isn’t a huge surprise considering we are hovering around the psychologically important 1.38 level, an area that has been very noisy more than once.
It is also worth noting that the 50-day EMA above is starting to come towards price, currently sitting at 1.3853, and of course, the 200-day EMA is sitting just above there. Ultimately, this is a market that I think is in the midst of trying to find its range because most of the time, the US dollar and the Canadian dollar spend time grinding back and forth. It is a very stable currency pair under most circumstances, as the massive amount of trade between the two countries makes this more of a utility pair than a highly speculative one.
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Navigating Trade Noise and Fundamentals
That being said, there is a lot of noise around the world about the trade situation between the Americans and the Canadians, but the reality is a different story. The noise around trade tariffs truly involves about 10% of all trade, as 90% roughly of US-Canadian trade is already in the framework of a deal signed during the first Trump presidency. While it is loud and it makes for a lot of headlines, the reality is that the currency pair is trading on its true fundamentals.
As things stand right now, I suspect we may be trying to carve out a longer-term range with the 1.36 level as support, and the resistance has yet to be carved out. I anticipate it is probably 1.40 based on fair value, but as things stand right now, a short-term pullback probably offers a little bit of value. Keep in mind that Friday is the employment announcement for both Canada and the US, so this pair could get rather noisy in a couple of days.
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