The US dollar rallied a bit during the trading session on Monday, as we are starting to see a little bit of a “risk off” attitude, as the 1.25 level above is a significant barrier though, and I think it is going to be difficult to break above that level. If we do, that could change the overall attitude of the recent selloff, as the Friday session had seen the US jobs number coming under expected figures, while the Canadian jobs number was better than anticipated. It makes sense that the market broke down below the 1.25 level significantly, but as you can see pulling back shows a perhaps traders are not as confident as they were on Friday.
If we make a break below the bottom of the move on Friday, then I think the market extends down to the 1.20 level underneath, and right now that is my base case, where I would expect to see much more significant support near the 1.20 level. I do recognize that a break above the 1.25 level would be very bullish though, and that would send this market much higher, perhaps towards the 1.29 level above which has been massively resistive. Pay attention to the oil markets, as they have a massive influence on the Canadian dollars well. They have an inverse correlation, so if the oil markets rally, that will provide more fuel to the fire for selling. If oil falls back, that should send this market higher.
Written by FX Empire