- The US dollar has been hammered against the Loonie during the trading session on Thursday as the preliminary GDP numbers came out at 0.2% in the United States as opposed to the 0.3% expected.
- This has bond markets being bought into, driving down yields, and therefore weakening the US dollar in the short term.
- That being said, we are still near a major area of support, so I don’t know if I would start piling into short trade here.
Technical Analysis
The technical analysis for this market is very obvious from a standpoint of support sitting just below, near the 1.37 level, but we also need to look at the longer-term chart which is still relatively bullish. The intermediate chart is absolutely horrifically negative, so what this means is you essentially have a very noisy market that has no idea what to do with itself from a 3 year cycle standpoint. Forex pairs tend to move in 3 year cycles, but right now we are in the midst of trying to figure out whether or not the US dollar is going to start falling again, and if so, will the Canadian dollar be a beneficiary?
There is still no trade agreement between the United States and Canada, although Canada recently had to drop its retaliatory tariffs to keep itself from falling into a recession, because it is so holy depended on the United States for both exports and many of its goods. Ultimately, this is a market that I think we will continue to pay close attention to the 1.37 level, because I do think it is an area that will remain important, and if we were to break down below there, we could drop down to the 1.35 level. On the other hand, if we turn around a break above the 1.39 level, then I think the US dollar starts to strengthen again against the Canadian dollar. In the short term, I would anticipate more back and forth trading.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.