- The US dollar has rallied significantly against the Canadian dollar to break above the 200 day EMA on Thursday as we continue to see upward pressure.
- All things being equal, this is a market that I think will continue to see a lot of buy on the dip behavior, but we do have the Jackson Hole Symposium during the trading session on Friday and the Jerome Powell speech, which is going to cause some noise.
Ultimately, I do think that we will go higher, but we will have to be cautious that there might be the occasional whippy or perhaps noisy pullback or shot higher and therefore caution is needed. If we do pull back from here, I think the 50 day EMA sits just above the 1.3750 level, which is an area that’s important as well. I’m looking to buy dips going forward and I do think that we will get to the 1.40 level eventually.
We Could Get Lucky…
Anything above there is just the bonus and could open up a move all the way to the 1.4250 level. A breakdown below the 1.37 level could open up a move down to the 1.36 level, but I don’t think that is as likely unless of course Jerome Powell explicitly says that he think interest rates are coming down rather soon. If that’s going to be the case, then that shocks the market.
However, keep in mind that this pair is a bit different considering that there is no trade agreement between these two countries, at least not a new one, and Canada is going to lose this argument. It’s only a matter of time. It’s kind of ironic that the Canadian elections were decided on fighting Trump. And right now, they’re not fighting Trump. They’re actually not even talking to the Americans and vice versa. So, the longer this goes on, the more damaging it is going to be for the Canadian economy. And therefore, I think it makes a lot of sense that we eventually go higher.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
