The US dollar has fallen from the C$1.29 level during trading on Thursday, as we have seen the US dollar gets hit overall. That being said, the market still has a lot to think about, so it will be difficult to imagine a scenario where we simply take off in one direction or the other. Keep in mind that the Canadian dollar also has the backing of crude oil, so that is worth noting as well.
The market has found the 1.29 level to be a bit of difficulty, but we have broken above there before. If we were to break above there, then it is likely that the 1.30 level would be the next target. On the other hand, if we were to break down below the bottom of the candlestick for the trading session on Thursday, then it is very likely that we would reach the 50 Day EMA given enough time. That currently sits at the C$1.2750 level, so I think a certain amount of psychology comes into the picture, as well as technical support. After that, then we would go looking to the 200 day EMA, where there would also be buyers.
As the Canadian dollar is highly levered to the oil market, you need to keep in mind that it is possible that you need to pay closer attention to the WTI market now that we have bounced. However, I also recognize that there is a lot of fear out there, and that does typically drive the US dollar higher over the longer term. Ultimately, this is a market that will be choppy which is relatively normal for this market. The two countries do so much cross-border traffic that it does make a lot of sense that we will continue to be noisy. That being the case, I am waiting to see what happens next but I recognize that there are still plenty of buyers out there for the greenback over the longer term. With this being the case, you need to be cautious about position sizing, but eventually we should get some type of bigger move. Over the next couple of days, we will more likely than not see some type of confirmation of directionality. The market will continue to see a lot of chop, so be cautious about jumping in.
