- The US dollar initially rallied a bit against the Canadian dollar, but it continues to see a lot of resistance near the 1.3750 level.
- That's an area that is the beginning of significant resistance, and if we can break above there, then we could make a move towards the 1.3850 level.
- This is an area that has been important multiple times, so I do think there’s a certain amount of “market memory” attached to this region.
- It also makes it a juicy target.
Short-term pullbacks are most certainly possible at this point, with the 50-day EMA being a potential target near the 1.37 level. The 1.37 level is an area that I think is minor support, but the 50-day EMA might cause some people to get involved. If we were to break down below there, then it's likely that we could go down to the 1.36 level, where the market has previously seen both support and resistance, and there should be a lot of market memory there. Either way, it’s almost impossible to short the US dollar against the Canadian dollar for any significant amount of time, as the Canadian economy has quite a few issues.
The 200-Day EMA
The 200-day EMA is quickly approaching that level as well. So, I think it all ties together to offer a bit of a floor. Ultimately, I think we have a scenario where you're just looking for bits of value to try to take advantage of cheap greenbacks. After all, the market is certainly going to continue to favor the higher yielding US dollar over the Canadian dollar.
It's also worth noting that Canada is very, very dependent on the US economy. So, we'll see how that plays out, but it certainly looks as if the US economy is outperforming Canada. And I do think that continues to be the case going forward, at least until the global growth situation changes as although crude oil has seen a little bit of a resurgence, the reality is that the United States produces more than enough crude oil for itself now. This has changed the overall attitude of this pair, and now we start to focus on central bank differential.
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