- The US dollar initially fell hard against the Canadian dollar during trading on Tuesday, but the 1.36 level continues to be an area of significant support.
- This is an area that has been important multiple times, so it’s not a huge surprise to see that we have turned around.
- At this point, we have to look at this through the prism of a large, round, psychologically significant figure, but also an area where we have seen a lot of trouble for short sellers.
Furthermore, the 200-Day EMA sits just below there, so I think it adds even more in the realm of support, and a lot of technical traders will have to pay close attention to it. As long as we can say above there, then it’s likely that the trading community will continue to look at this as a technically positive market, but it’s also worth noting that you could make an argument that it is very sideways, and that it is somewhat consolidation bound.
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Speaking of consolidation, if we do believe that this market is consolidation, then you have to look at the 1.36 level is the bottom of it, with the 1.38 level above is a significant resistance barrier. If we were to break above there, then it’s likely that we could go looking to the 1.39 level which of course is a very aggressive resistance barrier as well.
Crude oil doesn’t matter
At this point in time, crude oil doesn’t matter in this pair like it did in the past, because quite frankly the United States produces more than enough crude oil to make up the difference. At one point, that’s the only thing that really seemed to drive this pair (USD/CAD), but right now it has more to do with which economy is outperforming the other. Remember, the bank of Canada recently cut rates, and the Federal Reserve of course is still dragging its feet.
It looks as if the Federal Reserve is in no rush to cut rates, and as long as that’s going to be the case, it’s likely that we see a situation where the US dollar is favored over the Canadian dollar of the longer-term, and therefore I do expect to see a bigger break to the upside eventually but I just don’t know when that is.
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