- The US dollar has initially gone back and forth during the Monday session to kick off the week as we continue to consolidate overall.
- It’s worth noting that the 1.4350 level underneath offers a significant amount of support that had been broken at one point, only to see the pair turn around and rally to the upside.
- However, we also have the crucial 1.45 level above offering a bit of a ceiling in this pair, so I think at this point it does make a certain amount of sense that we go back and forth.
Markets can only go in one direction for so long, and it also looks as if we are in the midst of trying to build up some type of bullish flag.
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As things stand right now, it’s obvious that this is a bullish market, and therefore I don’t think you have a scenario where you are looking to short anytime soon. With this being said, I think this is a market that a lot of traders are starting to watch whether or not the Canadian Parliament can get its act together, and of course they will be watching the 10 year yield in the United States as it has been like a wrecking ball. If those interest rates in America continue to climb, that is going to put a lot of damage into the Canadian dollar pair, and we could very well break above the 1.45 level. The 1.45 level is an area that I think will continue to be important, but if we can break above there, then it’s likely that the market could go looking to the 1.4750 level after that.
On the downside, if we were to break down below the 1.4350 level, then it could open up a move down to the 1.42 level, an area that is also backed up by the 50 Day EMA, and an area that had a lot of historical volatility around it. With this being the case, I think you have to look at this as a market that you will be trying to find value in, and buying dips unless of course something changes in the bond market in America.
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