The US dollar went sideways initially on Tuesday, but then shot towards the 1.28 handle above, finally breaking out above that level slightly. Ultimately though, the market looks likely to pull back from here a bit though, because we are struggling at a recent high. We have gone a bit parabolic over the last 36 hours, and I think that a pullback is necessary to build up the momentum to go higher. This market is going to be highly influenced by crude oil as per usual, and with crude oil markets rolling over a bit, it makes sense that the Canadian dollar will lose value. That being said, there are is a lot of volatility in this market, so I think that it’s going to be very difficult to hang onto a large position. I believe that building a position as it works out in your favor is probably the best way to go, and I also recognize that underneath that the 1.2750 level is probably supportive based upon recent order flow.
Alternately, if we break above the 1.2833 handle, we will have made a fresh new high, which of course is a nice buying opportunity. The 1.27 level underneath should be massively supportive, but a breakdown below the 1.2675 level would be massively negative, and send this market much lower, perhaps down to the 1.25 handle. I believe that the volatility is going to continue to be an issue, as the oil markets have been very unsure to say the least. The high volatility in the oil market almost always translates into high volatility in this market. In general, I do favor the upside though, as it is more of a “risk off” move, something that I think is a bit overdue in general.
Written by FX Empire