The US dollar continues to see a lot of noise on Monday, as we are now facing a significant barrier just above in the USD/CAD barrier.
With this, we are watching 1.40 very closely.
The US dollar has risen during the early part of the trading session on Monday as we are now threatening the 1.3950 level. The 1.3950 level is an area that has been significant resistance previously, and I think it extends to the 1.40 level. Above, if we were to clear the 1.40 level, then the market is likely to continue to see buyers. Ultimately, this is a situation where if we see signs of exhaustion, then the market is likely to drift toward the 200-day EMA somewhere closer to the 1.3790 level.
Market Outlook
I do believe at this juncture that we are a little overextended, but you will have to watch interest rates in the United States as to what they are doing. If they continue to rally and rise, then that will make the US dollar stronger by default. The interest rate differential does favor the United States overall, although it is not a massive interest rate differential. Oil sold off a little bit during the day after initially spiking due to the hostilities in the Middle East. That negativity in oil may have had a knock-on effect in the Canadian dollar value in general, although the USD/CAD pair is not exactly where that is typically expressed.
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So, with that being said, I am watching 1.40 very closely. If we can break above that, it would be a major victory for the dollar. We have been pretty relentless to the upside. There have only been 2 red candlesticks since the beginning of May on the daily chart, but I think given enough time, we probably see a little bit of selling pressure here.
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