The oil shock doesn’t seem to be an issue for the USD/CAD pair at them moment, as “risk off” is taking hold.
The US dollar has rallied against the Canadian dollar, which really isn't a huge surprise considering that we had formed 3 hammers in a row, and I mentioned this yesterday and it does suggest that perhaps we were finding a floor. Keep in mind that the oil market rallying the way it has during the session has little influence on this pair because the United States produces 14 million barrels a day.
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The oil shock here won't be as felt as strong as places like the Canadian dollar against the Japanese yen. All things being equal, this is a market that I think continues to trade back and forth between 1.35 and 1.3750. I don't necessarily think that we break out, but if we do then obviously that would be a very bullish sign for the US dollar.
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I think a lot of this is likely to be a situation where if risk appetite gets hammered, the US dollar picks up strength. If it starts to pick up a little bit and people feel like being a little riskier, then maybe we roll over again. This is a pair that quite frankly spends a lot of time chopping around anyways, so this action should not be a huge surprise. Whether or not the Canadian dollar can finally break down below the 1.35 level remains to be seen, but as things stand right now, this is just a simple consolidation play that I had been talking about. It is finally working a little bit, but I think this is a short-term trade more than anything else. I am not looking for the moon here.
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