The US dollar rose initially on Thursday, as traders continue to threaten a break above the 1.3750 level in this market.
The US dollar rallied a bit in the early hours during the trading session on Thursday against the Canadian dollar, but we have seen the 1.3750 level act like a ceiling.
That is a little bit impressive considering that we have also seen the US dollar really take off due to 10-year yields slicing through the crucial 4.30 level.
Ultimately this is a market that I think continues to see a lot of questions asked about the oil market, but unfortunately most retail traders do not understand that the oil market does not have the same effect on this pair as it once did.
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If we were to break above the 1.3750 level, then I think it comes down to US rates rising again and possibly a risk appetite destruction story.
If we pull back, then I think it's more risk appetite entering the markets in general as people will be buying the Canadian dollar or perhaps more importantly not buying the US dollar.
We're at the top of a consolidation rally at this point in time and ultimately, I think we are trying to break out of this consolidation, but a short-term pullback might be necessary.
On a breakout to the upside of the 1.39 level is where I'd be aiming for, but I also recognize that at the 1.3807 level we have the 200-day EMA which could offer a little bit of resistance.
I have no interest in shorting this pair, at least not until we break down below the 1.35 level, something that would take quite a bit of downward pressure to reach. If that were to happen, I suspect that the US dollar will take it on the chin across the board.
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