- The USD/CAD has done very little during the trading session on Wednesday, as we continue to hang around the 1.36 level.
- 1.36 level is an area that saw a bit of noise in the past, so son if you are surprised to see that the market is hanging around here.
- It’s also worth noting that we are where the head and shoulders pattern had formed, so there could be a lot of noise here, to begin with.
When you look at the chart, you can see that we are in a rising wedge, which is technically a bearish pattern, and will more likely than not be influenced by the oil markets which are also trying to recover. Remember, the Canadian dollar is quite often thought of as a proxy for the crude oil market, and Forex traders will treat it as such.
Choppiness Ahead
On the other hand, the 50-Day EMA sits just below and is offering a little bit of support near the 1.35 level, which in and of itself should be supported based on psychology if nothing else. We should also pay close attention to the global growth story because Canada is going to be very sensitive to that as it is not only a crude oil exporter, but also exports a lot of other commodities. While the Canadian economy is nowhere near “Third World”, it does take a second seat to the United States when it comes to risk appetite.
If we can break above the 1.3750 level, then it’s possible that we have the market looking to go to the 1.38 level, and then eventually the 1.40 level which caused a lot of resistance previously. In that scenario, it’s very likely that we have a huge breakout, and a massive run higher for the US dollar. All things being equal, it’s very likely that we will probably see a lot of choppy behavior over the next couple of days, if for no other reason than the fact that we are close to the holidays, and of course, a lot of liquidity and volume will be gone. I think at this point, it’s more likely than not going to be a situation where we are just simply going to kill time over the next several sessions.
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