The US dollar drifted a little bit higher against the Canadian dollar during quiet trading on Tuesday. I still see a significant amount of resistance near the 1.25 level though, so I don’t have any interest in trying to press the issue right now. If we were to break above the 1.2525 level, then I could be convinced to start buying again, as the next significant resistance is somewhere near the 1.2750 level, followed by even more significant resistance at the 1.29 level. Alternately, I think that is only a matter of time before the 1.25 level offers resistance though, so I’m waiting to see if we get a bit of selling in that area that I can take advantage of as the breakdown was so significant. I think that the other opportunity would be to sell on a fresh, new low, as I see significant support at the 1.20 level that longer-term traders will more than likely be willing to aim for. At that point, I think that a lot of long-term questions will be asked of the marketplace, and a breakdown below that level would be catastrophic for the greenback against the Loonie.
With both economies being so heavily intertwined, it makes sense that the currency pair remains very volatile. The oil markets also drive this obviously, which of course has been very choppy and difficult to deal with as of late, although certainly has been in favor of the Canadian dollar.
Written by FX Empire