- The US dollar initially did rally during the trading session on Tuesday, but we are getting a bit stretched to say the least.
- The market will continue to look at the relative strength index very closely as we are now above the 70 level.
- And we have recently, during the last 24 hours, broke above the 1.38 level, an area that obviously captures a lot of attention as it is a large round psychologically significant figure.
- That being said, it's also worth noting that the 50-day EMA has just crossed the 200-day EMA to the upside, forming a bit of a bullish technical signal for longer-term traders call the “Golden Cross.”
We are Stretched at This Point
I think this is a market that's just gone too far and too short of a amount of time. The market will continue to pay close attention to what goes on in Canada. And it is worth noting that CPI in Canada missed horribly.
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So that had a bit of negativity with the Canadian dollar in and of itself. Nonetheless, I do think this is a market that given enough time probably sees buyers on dips, especially if we were to drop towards the 1.37 level.
If we can break above the highs of the day, which looks as if it is the 1.3840 level, then it opens up a move to the 1.39 level.
There are a lot of concerns about the global economy, and that of course favors the US dollar, but again, I think this is just simply a situation where we went too far and too short of amount of time.
Because of this, I would assume that there are a lot of traders that are waiting for an opportunity to get long of the USD/CAD exchange rate, as the market clearly differentiates between these two economies. This is a situation where we are simply following the strong of the two economies.
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