The US dollar continues to see a lot of upward pressure, but at this point, we are still looking at a massive consolidation area.
USD/CAD
The U.S. dollar gapped higher to kick off the trading week against the Canadian dollar, which makes sense as rates are still elevated in the United States. Of course, we just got horrible jobs numbers coming out of Canada. Therefore, it is worth watching very closely how this pair plays out.
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The beginning of 2025 was right around this area, and the 1.4250 level was supported in a major cluster. That being said, the situation is much different now, as we have to keep in mind that interest rates in America are higher because of higher energy input costs and inflation in general.
Interest rates and oil continue to be factors.
The interest rates in America are higher because of higher energy input costs and just inflation in general Canada is backed by oil, but it is not as big of a deal in this pair as it is in other places. So, while it does provide a little bit of a drag on U.S. dollar strength against the Canadian dollar, the reality is this is a pair that I think probably still favors the U.S. dollar unless we can break down below the 1.42 level.
If we break down below there, then we have a potential shot of taking a big dip toward the 50-day EMA. I am not necessarily convinced that could happen, but if it were, then we have a potential move not only there, but maybe even a little bit deeper.
A move bouncing from here and the market taking out the 1.43 level could open up a situation where we go much higher, probably to 1.45 before it is all said and done. Interest-rate differential continues to favor the United States and probably will for the foreseeable future.
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