The US dollar bounced a bit on Tuesday, as the interest rates in the US rallied in reaction to the lack of talks between the Americans and Iranians.
With this, the dollar continues to attract a bit of interest.
The US dollar has found itself to be somewhat positive during trading here on Tuesday as there are some concerns about whether or not the talks in Islamabad will bring about true peace.
Furthermore, we have to ask questions about being oversold. We basically just fell off of a cliff recently and that has a major influence on what happens next as well. So, with that being said, I think you have got a scenario where we probably look at the USD/CAD pair through the eyes of a potential bounce into the region between the 1.37 and the 1.3750 levels.
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And I think that is probably where we are heading. The question of course is can we break above there? I think we only break above there if we get really bad news from the Middle East because that will have people running to the dollar.
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The Canadian dollar itself is somewhat insulated due to the oil markets, but let’s be honest here, the US dollar isn’t as sensitive against the Canadian dollar as far as oil is concerned as it once was because quite frankly the United States produces more oil. Because of this, the pair reacts a bit differently than most people used to think for years. The market has changed.
So, with that, I think a short-term bounce makes sense. I’ll be watching the 1.3750 level because anything above there would be a true recovery. If we start to sell off, then I suspect we will go looking at the 1.3550 level underneath.
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