The interest rate differential between these two currencies still favors the US dollar, but with the noise coming out of the oil markets, it makes sense that we continue to see a range play out.
USD/CAD
The US dollar gave back quite a bit of the gains on Wednesday against the Canadian dollar as we see a major barrier above. The interest rate differential between these two economies still favors the United States dollar, but it's not so massive that it is coming into play at the moment.
The 50-day EMA sitting just below the 1.3750 level I think is a bit of a barrier and we will have to watch it. But if we were to break above the 1.3750 level, that could open up a fresh round of US dollar buying.
Staying in a State of Consolidation
Keep in mind that oil comes into the picture slightly for the Canadian dollar, but in this particular pair, the United States produces enough oil that it offsets most of that. It dampens the effect that you would typically see.
Based on the price action during the trading session on Wednesday, I think we're probably just staying in a state of consolidation at the moment. I do believe eventually we have to make a bigger decision, but if you're a short-term trader, the area between 1.36 and 1.3720 has been ripe for plenty of trade over the last couple of days.
I don't really see anything that changes it anytime soon and I do believe that ultimately, we start to have to come up with some type of reason to get moving. I prefer the upside, but I also recognize that we could drop all the way down to the 1.35 level and still not change anything. This is a very choppy pair, but one that suits intraday trading quite nicely.