The US dollar continues to drift lower against the Canadian dollar, as we are now testing the crucial 1.27 handle. This is an area where the buyers should return, it if they do it would be a very negative sign. That would perhaps open the possibility of a move to the 1.25 handle, which is the next major support level on the longer-term charts. It also has a certain amount of psychological importance as well, so I think the 1.25 level becomes very important on this breakdown. However, if we were to bounce from here this could be exactly with the pair needs to pick up the upward momentum again. There are a lot of moving pieces in this market, and quite frankly I think it’s difficult to hang onto a trade for any significant amount of time if you are using a large position size.
Ultimately, I think that the next 24 hours could be very important. Because of this, you might be better off waiting for some type of clear signal to start putting money to work. Crude oil markets are starting to rally again, but they also will have a limited upside potential, as we will most certainly see more drilling in North America as the pricing of crude oil rises. So that is probably going to be a temporary boon for the Loonie. Because of all of this, I think we continue to see a lot of choppiness, but if there is concern around the world in some type of geopolitical aspect, that could turn this market around in the blink of an eye. While Thursday was negative, it wasn’t exactly catastrophic. Be patient, by the end of the trading session today, we could have a little bit more clarity as whether the support is going to hold.
Written by FX Empire