The US dollar fell against the Canadian dollar and others with the ceasefire being announced.
USD/CAD
The US dollar has fallen against the Canadian dollar during trading on Wednesday as rates fall in reaction to a ceasefire agreement between the United States and Iran. That being said, we already have seen some violations of this, and it'll be interesting to see if this can continue.
We have bounced a bit from the 200-day EMA so from a technical analysis standpoint it suggests that we could bounce even further and I certainly would not want to be short of this pair. Between the US dollar still having higher rates than the Canadian dollar and oil getting absolutely crushed early in the day that's a little bit of a double whammy against the Canadian dollar despite the fact that the US dollar has drifted lower and I think that is more or less the war premium trying to come out of the charts.
Interest Rates and the Geopolitical Game
I'll watch this 200-day EMA and if we can bounce from here and sustain that bounce, I'm a buyer. I think at that point we will probably go looking at the 1.40 level. Furthermore, Iran has complained about the Israeli strikes in Lebanon after the ceasefire and has more likely than not put some fear back into the market with that being the case as traders will try to do what they can to price in what might happen with the global economy.
Remember this pair isn't as influenced by oil as you've probably been taught. The United States produces 13.52 million barrels of crude oil a day. So, it's not exactly like there's no oil in the United States and once you add all of the distillates and some of the jet fuels those types of things kerosene you start to talk about 20.5 million barrels a day bigger than Saudi Arabia by a factor of 2.
So, with that being the case I would not play the oil game here. I would play the interest rate game and the geopolitical game. So far we are seeing a little bit of an easing in tensions, but they are certainly doing everything they can in the Middle East to kick this off again.