The US dollar shut higher against the Canadian dollar initially during the session on Wednesday, but found enough resistance just below the 1.26 level to turn around and fall significantly. Part of this would’ve been done due to the crude oil inventory announcements coming out, which were slightly positive for crude oil. Currently, looks as if we are going to go back towards the 1.25 handle, but I believe we continue to see volatility. What I cannot help but notice is that we have made a “higher high” on the hourly chart, so I’m starting to think that perhaps we are trying to put in a bottom to the massive selloff. This makes quite a bit of sense, as there is a massive uptrend line on the weekly chart near the 1.24 handle.
I think that this market is probably going to be suited for short-term trading in the next several sessions, but if we can break out to yet another “higher high”, I then I’m going to be aiming for a longer-term move to the upside. The volatility will continue, but I think that today’s jobs number coming out will be a massive mover of this market in one direction or the other. Keep in mind that a lot of what’s been moving the Canadian dollar as of late has been the bond market, which has been shorting US treasuries while buying Canadian bonds. If that trade is coming unwound, we could see this market reach towards the upside. A breakdown below the 1.24 handle was very negative, and changes longer-term trend to the downside. In the meantime, I would expect a lot of volatility, especially around 8:30 AM New York time today as the Nonfarm Payroll Announcements come out.
Written by FX Empire