US Dollar Challenges Ceiling Against the Loonie Again
The United States dollar has rallied against the Canadian on Tuesday as we continue to see a massive “W pattern” form.
USDCAD
The United States dollar has rallied against the Canadian dollar during the Tuesday session as we are threatening the 1.3725 level which also features the 50-day EMA. If we can break above the 50-day EMA level, then it opens up the possibility of a bigger move.
That being said, we did give back some of the gains and now it looks like a little bit of a shooting star. If breaking above the shooting star does in fact happen, it's likely that we go higher, perhaps trying to reach the 200-day EMA and then eventually the 1.39 level.
Technical Patterns and Fundamental Drivers
Pulling back from here would make a certain amount of sense as the market has continued to see a lot of noise here and I think we have this situation where if we do fall from here the 1.36 level is an area that traders will be watching for potential support and then again at the 1.35 level. This is a market that's in the process of forming a massive W shaped pattern and that is something worth watching. It's one of my favorite patterns, but we don't have the breakout quite yet.
With the US trade tariffs hitting the rest of the world and of course a lot of questions to ask about what happens in the State of the Union address tonight, I think a lot of people will be active in Asia trading this. I do favor the upside but at this point, I'd rather buy a dip if I’m honest.
The interest rate differential favors the US dollar and probably will for a while. Therefore, combining the interest rate payment at the end of the day and a little bit of value in the greenback is how I plan on trading this, assuming that we drop and then get a bounce. On a breakout, I just think we're aiming for 1.39 above.