- The USD/CAD has rallied against the Canadian dollar again as the crude oil market felt rather hard during the trading session on Wednesday.
- The 50-Day EMA sits right around the 1.35 level, an area that we have been paying attention to. If we can break above the 1.37 level, then we could start to test the highs again, perhaps reaching the 1.40 level.
- Obviously, that would take some work, and I don’t necessarily expect that to happen between now and next year, but it is a possibility.
More likely than not, we have a situation where you are going to be buying dips, looking for value in the greenback. The reports of the demise of the US dollar, as per usual, are greatly exaggerated. This is especially true with the Canadian dollar, as I am presently sitting in Montréal right now, and can tell you that prices here are outrageous. However, it’s also worth noting that inflation is the only issue, as they are starting to see a housing bubble burst here in the provinces of both Ontario and Québec. Whether or not it sticks or it shows itself in the currency market is a completely different question, because quite frankly I think a lot of times FX traders tend to simplify the Canadian dollar, in relation to oil and oil only.
Market Looks Strong
From a technical analysis standpoint, this is a market that does look reasonably strong, and the US dollar does seem to be clawing back some of its losses. We are between the two biggest holidays of the year though, so I’m not looking for major moves, just recognize that we could continue to see a bit of bullish pressure. Quite frankly, I’m not reading too much into this other than the fact that we are trying to confirm the longer-term uptrend.
The Federal Reserve is going to remain very tight, and oil is going to continue suffering at the hands of slowing global demand and growth, which is like a double hex on the market. Because of this, it’s very likely that we will see the Canadian dollar continue to soften. It’s not till we break down below the 200-Day EMA that I would consider going short, which is all the way down at the 1.32 level underneath.
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