The US dollar dropped a bit against the Loonie on Tuesday, but have since seen a bit of help.
USD/CAD
The US dollar initially fell against the Canadian dollar but has turned around to show signs of life again. That being said, we are still very much in consolidation with the 1.3550 level underneath being the beginning of a significant support level that drops down to the 1.35 handle.
Market participants will continue to pay close attention to interest rates and they of course do favor the US dollar, but I also recognize that this is a market that continues to see a lot of questions asked about whether or not the markets will see enough problems with the crude oil situation that traders will run to the Canadian dollar.
Crude Production and Risk Appetite
That being said, the Canadian dollar is not necessarily going to gain against the US dollar like many other currencies. After all, the United States produces almost 14 million barrels of crude a day, so with that being said, I think the thing that is most likely going to be a big driver will be risk appetite.
If risk appetite continues to have some issues or for that matter of money really continues to flow into the United States stock markets, then it makes sense that we would see traders continue to prefer the US dollar over the Canadian dollar.
The 1.37 level above is a significant barrier and breaking above that opens up the possibility of moving to the 1.3750 level. The 50-day EMA is in that area and that of course is something worth paying attention to, but I also recognize that given enough time we will have to make a bigger decision.
As things stand right now though, we are most clearly in a consolidation range that people will continue to pay close attention to. I like the idea of buying dips because quite frankly I do believe that the US dollar is the stronger of the two currencies.