The US dollar rallied a bit during the early part of the session here on Tuesday as we continue to threaten a bigger move to the upside.
Quite frankly, this is a market that I think will continue to favor the dollar over the longer term, but I also recognize that we have a situation where traders are trying to understand a interest rate differential situation along with a weakening Canadian economy and what that could mean for the outlook for the USD/CAD pair.
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Long-Term Targets and Technical Support
Over the longer term, I do think this is a market that goes looking to higher levels, probably the 1.39 level, maybe even the 1.3950 level. The 200-day EMA underneath is support right along with the 1.3750 level. The 50-day EMA is just underneath there, and I think that is also a big support level.
In other words, I like buying dips in this market. I don't really see any reason to get overly excited about any pullbacks. Even if we were to fall, I suspect it's probably only a matter of time before the buyers come back in to pick up the dollar as it is higher yielding a bit more than the Canadian dollar.
Ultimately, I think you've got a situation where we are just simply trying to get to the top of the consolidation range that goes back for quite some time. We are just above the middle part of it, and therefore I think we continue to see a little bit of follow-through. It's not going to be quick, it's not going to be easy, it never is in this pair, but grinding higher and collecting swap is what I expect to do.
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