The US dollar went sideways against the Canadian dollar during the trading session on Wednesday, as we are just below the 1.29 level. That’s an area that looks to be somewhat resistive, but I think given enough time we will break above there and go looking towards the 1.30 level. The market breaking above there should send the market on the next leg higher, and that is exactly what I am expecting longer term. I do recognize that occasionally we will pull back, but those pullbacks give us an opportunity to pick up value. After all, the Canadian dollar is falling in value while the WTI Crude Oil market continues to be stronger. That being the case, it is a bit of a strange twist and things, and this tells me just how the interest rate differential is starting to favor the US dollar. I think given enough time, we should continue to find buyers, but I also recognize that the volatility could come back into the marketplace if crude oil does explode to the upside.
Ultimately, I think that if we can stay above the 1.25 level below, we will continue to see the uptrend strengthen. Alternately, if we were to break down below the 1.25 level, that would be very negative, and perhaps justify the massive selloff that we had seen recently. However, that bond trade has all but died, and that of course should continue to push this market higher. I recognize the 1.33 level above will be the next resistance barrier, but quite frankly when we pull back I’m willing to add more to a winning position. Overall, the US dollar should continue to strengthen against most currencies, especially this one as the Bank of Canada looks very unlikely to raise rates anytime soon.
Written by FX Empire