The US dollar has rallied significantly during the trading session on Tuesday to break above the 1.36 handle. The 1.26 level being broken is a good sign, at least for the greenback. Furthermore, we are above the 200 day EMA now, and therefore it looks like we are trying to go higher. It should be noted at the same time we are starting to see oil look likely to break down, so if it does that will add more “fuel to the fire.”
The US dollar has strength across-the-board right now, and if that continues to be the case then it will show up over here. If we break above the highs of the trading session on Tuesday, then it is likely that the market will go looking towards 1.28 level, which is where we had pulled back from previously. Breaking above that level then opens up the possibility of a move to the 1.30 handle. The market between the US dollar in the Canadian dollar does tend to be very choppy, so do not be surprised if it takes a while to get to where we are going.
To the downside, if we were to break down below the uptrend line, then it is likely that we could go looking towards 1.25 handle, and then perhaps even go reaching towards the 50 day EMA. Breaking below the 50 day EMA would reestablish the downtrend, but based upon the recent price action, which seems to be the least likely of scenarios. In fact, you could make an argument for an ascending triangle that we just broke out of, which I see as measuring for a move towards 1.28 level, where we had pulled back from previously. Beyond that, there is the possibility that we could see a bit of a “golden cross”, as the 50 day EMA is starting to reach towards the 200 day EMA and break above it. The market will continue to pay close attention to both the greenback and the oil market, so keep all of that in mind. Furthermore, we have seen a lot of money go looking into the bond market which is more or less “risk off”, which could have the greenback continues to strengthen quite a bit over the longer term. At this point, it does look like we are trying to change the trend, which means it is going to be very noisy in the process.
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