The US dollar went sideways in general during the day on Monday, trying to break above the 1.2550 level. By doing so, the market looks likely to continue to try to reach towards the upside, but I think we need to build a bit of a base currently. As of late, the US dollar has been strengthening against the Canadian dollar, and the oil markets being soft of course doesn’t help the Canadian dollar either. Because of this, I think we will eventually go higher, but the 1.25 level underneath should be supportive and I think a bit of a short-term floor. If we did breakdown below there, the market should then go to the 1.2450 level, and a move below there should send this market much lower. Alternately, I do think that the buyers are in control, and if we can break above the 1.26 level, the market should continue to reach towards the 1.30 level above, and this is especially true if the oil markets roll over.
There is a lot of volatility in this pair, but that’s common as the 2 economies are so intertwined. The Bank of Canada has suggested recently that interest rate hikes aren’t necessarily going to be automatic, and that has the market turning around. At the same time, the Federal Reserve looks likely to raise rates at least one more time this year, if not a couple of times. That should lead to a higher US dollar in general, and of course that will be especially true against currencies who have central banks that are not looking to raise interest rates and such a steadfast manner. With this, a lot of what will happen in this currency pair is going to depend on comments coming out of both the Bank of Canada and the Federal Reserve, but also the oil markets. Ultimately, this is a very volatile market, but I think one that will ultimately find buyers.
Written by FX Empire