Short-term pullbacks continue to be what I look for in this market, as the interest rates continue to favor America.
USD/CAD
The US dollar initially pulled back just a touch during the trading session on Wednesday but turned around to show signs of life again as we continue to hang around that crucial 4.30% interest rate in the 10-year yield in America. If we can rally from here, the 1.37 level could be targeted, followed by the 1.3750 level. I think short-term pullbacks continue to be buying opportunities as interest rate differentials definitely favor you.
Market Dynamics and Interest Rate Expectations
Keep an eye on overall risk sentiment. If risk really starts to take off, then we might see more interest in the Canadian dollar. The oil markets have a little bit of an influence on the Canadian dollar, but not so much here, so I wouldn’t really worry too much about that, unless of course oil really takes off.
All things being equal, this is a market that given enough time will probably end up being very choppy and noisy and could continue to see the 1.35 level underneath being an extreme bottom with 1.40 above being an extreme ceiling. The 50-day EMA is sitting right at the 1.3750 level, an area that has been important multiple times, so that could be your target if we really break out to the upside, but I think it will be difficult to just simply slice through there unless we see interest rates spike in America again.
They have been stubbornly high and of course the Federal Reserve is now expected to be basically on hold for the rest of the year. If that is the case, eventually that wins out, eventually the US dollar picks up, but we will just have to wait and see how expectations change with headlines coming from the Middle East.