The USD/CAD pair continues to be one that I am watching, and it looks like the dollar is finally breaking out against the Loonie on Tuesday. Can it hold?
USD/CAD
All things being equal, this is a market that I think continues to see a lot of noise, but we are finally starting to break above a significant resistance barrier in the form of 1.3750. This area has been important for some time, so a breech of it is important.
The question at this point in time is whether or not the falling oil prices will be yet another dagger in the heart of the Canadian Dollar in general. It'll be interesting to see how this plays out because this pair is becoming less and less tied to oil, and quite frankly, the Americans produce more oil than Canada although it's a different grade.
KEY DRIVERS AND POTENTIAL TARGETS
Now that we're breaking above this area, I think we're going to go looking for the 200-day EMA right around 1.3805. A break above there then opens up the possibility of a move towards the 1.39 level. The 50-day EMA sits underneath the 1.37 level, and I think that is your short-term support level.
I do believe that given enough time, this is a market that you get paid at the end of every day and all things being equal, I think we just follow this route to the upside as things stand. That being said, if we were to break down below the 1.3650 level then things get rather ugly.
Ultimately, 10-year treasury yields in the United States continue to be a big driver, we're above 4.30% and that makes the Dollar more attractive than the Loonie, which of course has much lower rates. As long as that is the case, the dollar is preferable.