The US dollar rolled over against the Canadian dollar, reaching towards the 1.25 level on Tuesday. If we can break down below the 1.2450 level, the market should be very bearish, as it looks likely to show signs of rolling over from the recent breakdown. The uptrend line from the weekly chart did get broken recently, and a retest of that should confirm the downtrend. However, if we continue to bounce from this general vicinity, it’s likely that we continue to go much higher, as it would show a complete repudiation of that breakdown. Keep in mind that a lot of this was due to bond traders, and the interest rate differential between the United States and Canada, but recently we have seen the Bank of Canada suggests that raising interest rates isn’t necessarily going to be an automatic thing. This has put a bit of a pause on the selloff. In fact, we have completely taken back the losses from that surprise interest rate hike.
I believe the choppiness continues, but ultimately, we will make a decision. Once we do, it will be an easy trade to hang onto as this market is known to trend for long periods of time. I think that if we can continue to fall from here, it could send this market looking towards the 1.20 level underneath rather quickly. Alternately, if we break above the 1.2550 level, the market should then go towards the 1.2750 level after that. Either way, I think that you should also pay attention to the oil markets, which are highly influential on the Canadian dollar is well. All things being equal, I think that patience will be needed and perhaps trading from longer-term charts might be the best way to go.
Written by FX Empire