- The US dollar has rallied a bit during the early hours here on Thursday against the Canadian dollar as we have tested the 1.38 level.
- The 1.38 level is an area that’s been important, and now almost looks as if it is going to end up being the middle of a consolidation area.
The 50 day EMA hangs right around the same area as well. So that attracts a certain amount of attention. If we can break above the 1.38 level, then you could go looking at the 200 day EMA, which is at the 1.3865 level. Ultimately, this is a market that I think is still in the middle of trying to sort out what it wants to do because Canada has a whole host of problems where it continues to have issues with not exploiting resources.
Employment situation is horrible. And of course, we have a scenario where the United States, although struggling a little bit, the reality is that the American economy is still running somewhat hot. And of course, the interest rate differential, despite the interest rate cut still favors the US dollar. If we can break above the 1.39 level, then I think it’s likely that the US dollar will go higher.
If the Loonie Starts to Strengthen
If we break down below the 1.37 level, then we will test the 1.36 level, which is a major floor in the market. All things being equal though, this is a market that I think we consolidate. And then I would not be surprised if we eventually break out to the upside based on weak economic data out of Canada, or we’re shut weak economic data out of the United States because if the United States starts slowing down, Canada loses its biggest customer.
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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.
