The US dollar went sideways against the Canadian dollar initially during the session on Friday, reaching towards the 1.25 handle. This is an area that will continue to attract a lot of attention, as it is a large, round, psychologically significant number. If we find a selling pressure here, it makes sense that we would roll over and fall towards the 1.24 handle. Alternately, if we break above the 1.2550 level, the market should continue to go much higher. I think that the 1.24 level underneath being sliced through would be very negative, perhaps sending down to the 1.21 handle. Keep in mind that oil has a massive effect on this market, as it goes higher, this pair typically goes lower. However, I think that the oil markets have a significant overhang, and is difficult to break above there.
This being the case, I think the volatility will continue, but pay attention to the interest rate situation in the United States. As interest rates rise, that could continue to signal that we will go lower because the original meltdown had to do with the bond trade favoring the Canadians. We then had a surprise interest rate high coming out of Ottawa, but we have recaptured all of those losses. It is because of this that I feel it’s only a matter of time before we go higher, but it’s going to take some time to build up the necessary momentum. If we can break above the 1.2550 level, the market probably then goes to the 1.28 handle above which is the next resistance barrier, followed very closely by the 1.30 level after that. Ultimately, this market will continue to be very choppy, but that’s not a surprise, it typically is as the 2 economies are so intertwined.
Written by FX Empire