The US dollar rallied a bit during the early part of the trading session on Monday, but it looks like we are struggling a bit above the 1.3750 level.
This is the end of a range of resistance that has been important to pay attention to.
If the USD/CAD pair can continue to go higher, we can test the 200-day EMA, currently sitting about 30 pips higher, or we could go even further, maybe looking to the 1.39 level. A breakdown from here, test the 1.37 level for support. If it doesn't hold, then we could drop quite a bit, maybe down to 1.3550.
Interest Rate Differentials and Technical Action
All things being equal, the interest rate differential most certainly favors the US dollar, and it will for the foreseeable future. So, I'm not necessarily looking for any type of major move to the downside and I think any sell-off would probably be a bit of a short-term type of move.
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All things being equal, I think we do see a lot of choppy and volatile action right around this area and it makes sense because this is an area that's been important for quite some time. And of course, we have both the 50-day and the 200-day EMA indicators here so that comes into play.
I'm watching the 10-year yield in America because it's all the way up at 4.603% as I record this, meaning that rates are just continuing to punish risk appetite and, in some cases, other currencies with the amount of interest rate strength coming out of the US, that is the name of the game.
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