- The US dollar rallied against the Canadian dollar during the early part of the Thursday session, but there has been a bit of a pullback.
- All things being equal, this is a scenario where traders will be watching closely, as the 1.40 level continues to be a major support level and is backed up by the 50-day EMA.
- With that in mind, there should be a certain amount of support here just waiting to be taken into the 1.4250 level above.
- That remains the target and is viewed as a major area of supply.
Interest Rate Differential Helps Also
The interest rate differential favors the Americans, and the fact that the FOMC will not have fresh jobs data ahead of the next interest rate decision suggests that rate cuts in the United States may be delayed. That has driven the US dollar higher, and that dynamic is being reflected in this pair.
There are also lingering questions about the trade situation between the United States and Canada. Although no real progress has been made, a large portion of trade is already covered under existing agreements, so much of what is being argued about is at the margins. The United States is the larger of the two economies, and therefore as the US goes, so goes the Canadian economy.
The US economy is stumbling slightly, and therefore it makes sense that the US dollar continues to rise. Traders get paid at the end of every day to hold this pair, and that is exactly how it has been treated, with short-term dips offering buying opportunities.
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