- The US dollar has pulled back just a bit against the Canadian dollar, but it has recovered quite nicely during the trading session in order to form a bit of a hammer.
- This of course is a situation where we’ve seen a lot of noisy behavior right above the crucial 1.39 level. Interest rates in the United States and Canada both have been somewhat fluctuating and that has caused a little bit of noise in this pair.
- Nonetheless, I do believe that the US dollar will eventually try to break out, but in the meantime, things are going to be very quiet and very sideways.
This is mainly due to the fact that not only do we have the 1.39 level underneath offering support, but we also have the 50 day EMA as well as the 200 day EMA sitting above offering resistance. If we can break above those moving averages, then it’s likely that we will continue to go higher, perhaps reaching the 1.42 level. With this, I believe that you have a situation where things are going to be very choppy, but eventually we will get some type of momentum to send this market moving.
If we were to break down, I would watch this swing low at 1.3750 because if we were to break down below there, not only would the Canadian dollar strengthen against the U.S. but that probably would mean that the U.S. dollar is struggling against most currencies around the world and the Canadian dollar is just a beneficiary of that. As things stand right now though, I still like buying this pair. It’s been a longer term uptrend, but it does tend to be very choppy at times. And this is just one of those times.
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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.