The US dollar initially tried to rally against the Canadian dollar during trading on Thursday but gave back gains rather quickly above the 1.3850 level, a minor level, but one that has created a little bit of noise here.
Ultimately, this is a market that I think continues to see a lot of choppy and volatility out there, but I think what we've got is also the market testing the 200-day EMA and this sets up an interesting level.
Yield Differentials and Risk Sentiment
The 4.30 level in the US 10-year yield continues to be a major driver as well and if we jump back above there, then I think the Canadian dollar will probably end up being a victim of that as the US dollar could turn things around. If we were to break down below here, then the 1.3750 level and the 50-day EMA would be looked at as a potential target. I would also expect the 10-year yield to drop from there.
Top Regulated Brokers
This is not an oil play anymore and it hasn't been for several years, although it does have a little bit of a knock-on effect with the strength of the Canadian dollar in general. This is about interest rate differential which still favors the US dollar, although admittedly, it's not wildly wide. It is a very slight differential.
So, I wouldn't worry too much about it, but if yields start to rise in America, then that changes the equation. If we have concerns about risk appetite, that also favors the US dollar. Keep in mind that Friday has conversations happening between the Iranians and the Americans and if things don't go well, that probably has people looking for safety and, in this case, that is buying this pair.
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