The US dollar rallied against the Canadian dollar during Tuesday’s trading hours, as the crude oil markets absolutely fell apart. The Canadian dollar of course is very sensitive to what’s going on in the oil market, as the trading world tends to use the Canadian dollar as proxy for that market. The fact that we bounced so significantly off the 1.32 handle suggests that there will continue to be volatility in this market. I break above the 1.33 level should send this market much higher, perhaps reaching towards the 1.3450 level. With today having a crude oil inventories announcement coming out, it’s likely that we will see a significant amount of choppiness coming into this market, and certainly should see quite a bit of momentum in one direction or the other.
I believe that the consolidation continues, unless of course something happens that is significant in the crude oil market. Because of this, I believe that the real risk is probably to the upside, regardless of hockey’s comments coming out of the Bank of Canada recently. Remember, even though the Canadians are starting to talk like tightening is coming, the reality is that the Americans already are in a tightening cycle. Beyond that, crude oil should continue to fall, and that should continue to favor the upside longer-term. In the short-term, it’s obvious that we are trading in a one handle range, but I believe that the breakout is probably coming. When you look at the longer-term aspects of the chart, we have been in an uptrend in channel for some time, so that of course favors longer-term money coming in to the upside as well. I don’t have much interest in selling beyond trying to play the short-term range.
Written by FX Empire