The US dollar rallied against the Loonie early on Tuesday but has since rolled over to show hesitation.
USD/CAD
The US dollar rallied against the Canadian dollar early during the trading session on Tuesday, breaking above the crucial 1.40 level. The 1.40 level is a large, round, psychologically significant figure that has been important multiple times.
That being said, I think we pierced the top of a range of resistance that extends from the 1.3950 level. And therefore, I think you've got a situation where traders are looking for some type of reason to go higher, but we just don't have it quite yet.
Oil prices falling definitely worked against the Canadian dollar as of late. But that isn't enough to move this pair by itself. Simply put, it is because the Americans produce so much of their own oil now that this market isn't as focused on oil as it once was.
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The 50-day EMA has recently broken above the 200-day EMA on the daily chart, kicking off the so-called golden cross, so longer-term traders will be looking at dips as potential buying opportunities. But I also recognize that there is a lot of volatility and a lot of noise out there that will continue to be a major issue.
With the headlines coming out of the Middle East being so erratic over the last several weeks, it does make sense that there's a little bit of trepidation when it comes to the idea of going all-in on a trade. After all, it wouldn't take much to derail the entire peace process, which could drive US yields higher.
US yields have been falling, and that, of course, works against US dollar strength in most scenarios, but that has not been the case here. A lot of this comes down to the weakness of the Canadian economy. Short-term pullback should continue to attract.
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