Potential Signal:
- While I do think that we are in the process of bottoming, the most obvious signal at this point in time would be to short this pair if we were to break down below the 1.35 level.
- The stop loss would have to be at the 1.37 level, and you would be aiming for a move to while I don’t think this happens easily, it’s something to make note of and pay attention to.
The US dollar initially fell a bit during the trading session on Tuesday but turned around quite rapidly against the Canadian dollar as the JOLTS Job Opening number came out hotter than anticipated, suggesting that the Federal Reserve may have to keep that in mind as the interest rate situation in America is getting a bit interesting. After all, there are a lot of questions asked about whether or not the Federal Reserve has waited too long, but quite frankly the economy continues to show signs of life, and employment being strong of course is a major factor in the decisions that the Federal Reserve makes.
Federal Reserve Cutting?
The biggest question right now is whether or not the Federal Reserve is going to be cutting rates anytime soon, with the possibility of an interest rate cut in September being as high as 90% at times based on the latest Bed Funds Futures markets, but quite frankly this is a moving target at the moment, and there have been multiple times where markets thought that the Federal Reserve would be cutting rates over the last year or so, only to get disappointed yet again. I suspect that could be the case going forward, but we will have to wait and see how it plays out.
It’s probably worth noting that the 1.35 level underneath is a major support level on longer-term charts, so it would not be surprising at all to see this market bounce from somewhere in this general vicinity, and I have been looking for value in the US dollar as it has been oversold against multiple currencies, which the Canadian dollar is no different. Furthermore, you also have to keep in mind that there is still a trade war going on between the United States and Canada, and it seems like it is only getting messier, despite the fact that the White House recently said they expect a signed a deal fairly soon. Because of this, I think you will have to accept the fact that there could be a lot of noise here.
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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.