- The USD/CAD has rallied significantly during the trading session on Monday to slam into the 1.3475 handle, an area where we’ve seen a bit of resistance previously.
- We had broken above the 50-Day EMA during the trading session but gave back some of those gains to show a little bit of hesitation.
- Currently, we need to determine whether we can break out of this range between the 200-Day EMA underneath, in the 50-Day EMA above.
- At this point, it certainly looks as if we will eventually try to make that move, but we did not have enough momentum during the day on Monday. That doesn’t mean that we will get it on Tuesday, just that we aren’t quite ready to do that yet.
Breaking above the 1.35 level would almost certainly send quite a bit of momentum into the market and quite a bit of “FOMO.” At that point, I would anticipate that the US dollar goes looking to the 1.37 level above, which is an area where we have seen a lot of resistance. Breaking above that area allows the possibility of a move to the 1.40 level.
Noise Ahead
On the other hand, if we were to break down below the 200-Day EMA, then it opens the possibility of a move down to the 1.30 level underneath. The 1.30 level is an area that will attract a lot of attention, as it is a large, round, psychologically significant figure and an area that has seen a lot of action in the past. Because of this, I think it’s a situation where you must look at this through the prism of whether the bottom falls out.
Keep in mind that crude oil has a major influence on the Canadian dollar itself, so that’s something worth paying attention to as well. Ultimately, this is a market that will continue to be very noisy, but it certainly looks as if there are some people out there willing to get long of this market based upon what we have seen over the last several sessions. The US dollar itself has been strong against most currencies during the day, so it comes down to whether it can keep up the momentum. Pullbacks at this point should find plenty of support near that 200-Day EMA.
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