The US dollar tried to rally on Wednesday, but the Canadian dollar has proven itself to be resilient.
USDCAD
The US dollar tried to rally against the Canadian dollar initially during the trading session on Wednesday but gave back some of the gains to show signs of hesitation and exhaustion. All things being equal, this is a situation where I think you are watching action in this area very closely because the area between the 1.3750 level and the 1.37 level makes a lot of potential moves just wait to happen.
This is an area that previously had been a resistance barrier and now it looks like a potential support level. If we can turn around and break above the 1.3775 level, then it opens up the possibility of a move to the 1.3950 level. If we break down below the 1.37 level, it could open up a move down to the 1.3550 level.
Oil Sensitivity and Interest Rates
Keep in mind that the Canadian dollar is highly sensitive to oil, but maybe not as much in this pair as you might expect due to the fact that the United States has the ability to produce its own oil. It is a pretty significant producer of oil, producing just under 14 million barrels a day, and that is something that changes the overall attitude of this pair in contrast with many others that involve the Canadian dollar.
The interest rate differential still favors the Americans and probably will continue to do so, and in this environment, I just don't find a reason to get short quite yet. I in fact am waiting for some type of breakdown and bounce to get long. We haven't quite had it yet, although it looked like we were trying to do it during Tuesday, but once I get a V-shaped pattern that I can trade on the right side of, I will get long.