The US dollar continues to see a lot of questions asked about it, but at this point in time, the Canadian dollar has been a touch soft. Oil is a wildcard, but at this point, it is still not a major factor.
USDCAD
The US dollar initially fell against the Canadian dollar but turned around to show signs of strength again to test the crucial 1.37 level. The 1.37 level has been a significant barrier for a minute now, and I do think that it continues to be important. The 50-day EMA sits just above there as well, so I think you have to pay close attention.
Ultimately, the 1.3750 level is an area that I think once we break above there, the US dollar really could take off. Keep in mind that the oil markets don't have the influence that they once did as the United States produces 13.5 million barrels a day on this pair, but it is something you can't completely ignore either.
Interest Rate Differentials and Market Momentum
The interest rate differential continues to favor the United States and probably will for the foreseeable future, despite the fact that traders are banking on the idea that the Federal Reserve will cut a few times. With that being said, I do think that we are in the middle of trying to bottom here. This could be a long term process, but regardless, this is a situation that looks to becoming increasingly obvious.
A pullback makes a certain amount of sense, and I think value hunters will continue to flock to this pair as long as we can stay above the 1.35 level. Again though, if we can find ourselves on a daily close above 1.3750, I think we do have the momentum at that point to perhaps go looking for the 1.39 level. I am bullish, but I also recognize that this is a very choppy pair under the best of circumstances.
Potential signal: I am buying on a daily close above 1.3750, with a stop at 1.3633, and a target of 1.39 above.