The US dollar continues to see a lot of buying pressures in most markets, including against the Canadian dollar, based on higher US rates at the moment.
USD/CAD
The US dollar continues to grind higher against the Canadian dollar as we see the interest rate differential favor the greenback. All things being equal, it looks like we are getting ready to look to the 1.39 level.
The 1.39 level is an area that has attracted a lot of noise as of late and therefore I think it is going to have a little bit of built-in resistance. If the market were to break above the 1.3933 level, then we could go looking to the 1.40 level.
Resistance Barriers and Interest Rate Drivers
A short-term pullback at this point in time does make a certain amount of sense, but I still favor the US dollar over the Canadian dollar despite the fact that oil has been rallying. After all, this is a market that continues to be one that is probably running based on interest rates and what they're doing in the markets.
I think you've got a scenario where any pullback at this point probably attracts a lot of attention, especially near the 200-day EMA. If we were to break down below there, then the market could go to the 1.3750 level.
I don't have any interest in shorting this pair anytime soon, but ultimately, I do think that finding a little bit of value along the way might be the way to go going forward. I don't necessarily expect this pair to break above the 1.40 level, but we also have a situation where we are a little overextended and therefore a bit of a relief rally for the Canadian dollar would make a certain amount of sense.