The US dollar has risen a bit on Tuesday as we see noise around a couple of central bank decisions.
USD/CAD
From Daily Forex, this is Christopher Lewis taking a look at the US dollar against the Canadian dollar. The US dollar has risen a bit during the early hours on Tuesday as we continue to chip away at a major resistance barrier between 1.37 and 1.3750. If we can finally kill the resistance barrier off, this is a pair that could take off for a while and that does make a certain amount of sense.
But we also have to keep in mind that both central banks are meeting over the next 48 hours and therefore you could see a lot of choppiness. I think neither central banker is going to do anything, but there will be the tone of the statement and the press conference that people will be watching.
Economic Indicators and Potential Outliers
Ultimately, this is a market where short-term pullbacks continue to offer buying opportunities. But if we were to break down below the lows of the session on Monday and stay below there, then I think it could really send this pair reeling. That would be a major risk-on type of event or something shocking coming out of Ottawa during the meeting.
Ultimately, this is a market that I think does go looking to 1.39 eventually despite the fact that oil is strong but let us not forget that the oil influence in this pair just isn't there anymore. The market sometimes rewards the Canadian dollar for stronger oil prices, but very rarely against the US dollar as the United States is the largest producer of crude oil in the world. In fact, it's really only heavy oil out of Canada that influences this currency pair.
Now, having said that, I don't necessarily think this is about oil anyways. I think this is about geopolitical risk and the fact that inflation is stubborn in the United States and that continues to be the story here. At the same time, Canada's economy is starting to show signs of crumbling a bit. So, I still favor the upside, especially if the Fed sounds hawkish.
Potential signal: I am buying this pair on a break above 1.3750 that lasts for two hours or more. I would have a stop at 1.3650 and target the 1.3890 level.