The US dollar fell a bit against the Loonie on Wednesday as we may have gotten a little overstretched in this pair. At this point, the longer term doesn’t look different, unless the war ends.
USD/CAD
If you've been following my analysis here at Daily Forex, I have suggested that perhaps a pullback was coming and we are starting to see that. After all, we formed a beautiful setup. The question of course is whether or not we can continue to drop from here.
I would prefer to be a buyer of the US dollar on dips and a move back down to the 200-day EMA would be an excellent setup from what I can see. Interest rate differential continues to favor the United States, and it will for the foreseeable future.
TECHNICAL SUPPORT AND ECONOMIC DATA
If we get some type of agreement between the Americans and the Iranians, it's possible that the US dollar falls apart against most currencies and that would be the same against the Canadian dollar. All things being equal, I'm looking to buy the dip, and I do believe that the 1.38 level is an area of interest anyway and the fact that the 200-day EMA is sitting right there helps as well.
During the trading session on Wednesday, we had some Canadian economic announcement in the form of manufacturing PMI. It came out at 50 even, suggesting that perhaps we aren't necessarily seeing growth in Canada, but we aren't necessarily seeing selling pressure either.
Core retail sales in the United States are stronger than anticipated and of course the ADP non-farm payroll employment change was more bullish than anticipated. That being said, I do think that the biggest driver of everything right now remains the bond market, and where the rates are going in the USA.