- The USD/CAD has fallen rather hard, losing over 1% for the session.
- The 1.35 level is an area that a lot of people will pay close attention to, and of course, you also have the 50-Day EMA sitting right around the same area.
- If we were to break down below the 1.35 level, does set up a bigger trade, and it’s worth noting that I could make an argument for a bit of a rising wedge that just got broken, but I also think that this is a situation where we have chopped enough through the bottom trendline that we could make an argument that we still have some work to do.
The size of the candlestick is rather impressive, but it’s worth noting that the FOMC Meeting Minutes still need to come out, and then of course we have the jobs number from both countries coming out on Friday. In other words, I don’t consider this a “done deal”, because there’s so much in the way of fundamental noise coming out.
Pay Attention to the Oil Markets
With that in mind, you must be very cautious, but I do think that we are going to see a lot of noisy behavior. The market is going to continue to pay attention to the oil market as well, as crude oil has been very noisy as of late. The Canadian dollar being so highly levered to the commodity is a well-known fact, so you have to keep both charts up in order to trade, and therefore I think we got a situation where the 200-Day EMA underneath could be the target if we break down, because it’s also right at the 1.32 level, an area that’s been important, and of course, it is the bottom of the overall wedge. On the other hand, if we take out the highs from the last couple of sessions, that could open the 1.40 level in despair.
A lot of this is going to come down to the jobs number and of course the Federal Reserve FOMC Meeting Minutes, and whether they sound extraordinarily hawkish. It will be a bit of a “double whammy” because a tightening economy will almost certainly drive down demand for oil yet again, which has been toxic for the Canadian dollar.
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