The US dollar initially tried to rally against the Loonie during the trading session on Friday but has given back a significant amount of momentum to turn back around completely break to a fresh, new low. This suggests that we have much further to go, because quite frankly the 1.25 level was an important level to pay attention to on the longer-term charts. At this point, it is also worth noting that the crude oil market looks as if it is ready to continue to explode to the upside so that should provide bullish pressure for the Loonie as well.
However, you should also be aware the fact that the Canadian employment figures were much stronger than anticipated, adding a little bit over 250,000 for the month of February, when it was anticipated to only be an addition of roughly 30,000. In other words, the Canadian economy is going like gangbusters, at least as far as labor is concerned. That is also going to be a rocket fuel for the idea of the GDP in Canada strengthening, but at this point it is a bit difficult to imagine a scenario where Canada is going to be raising rates anytime soon.
Remember, currencies are basically a relative strength again, and the US dollar seems to be on its back foot over the last couple of days, after spiking quite viciously. We have seen the downtrend line hold as resistance, just as the 50 day EMA has. In other words, the trend is very much intact and now it looks like a simple matter of fading short-term rallies or selling on a breakdown below the lows. At this point, we could go looking towards the 1.20 level if we can continue the overall downward pressure. On the other hand, if we were to somehow break higher and clear the 50 day EMA, then I think we could see this market go looking towards much higher levels, maybe even the 1.30 level. With all that being said, this is a market that I think continues to see more downward pressure than up, so I do not see any reason to buy it in the short term. I think the Friday candlestick is very telling as to where we are going next.
