- The US dollar initially rallied against the Canadian dollar against the backdrop of a market heading into the weekend but gave back those gains as I suspect some shorter-term speculators have collected their profits and were willing to go home with them.
- That being said, this is a pair that I still favor the upside, and I think that sooner or later we will get a bit of a pullback that we can start buying.
Technical Analysis
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The technical analysis for this market is strong, as we have recently, and the last 48 hours that is, broke out of a consolidation range that has been in place since the beginning of August. By breaking above the 1.39 level, that shows that we are starting to see a lot of momentum enter the market, and that of course will have people interested. If we get a bit of a pullback from here, the 200 Day EMA will be targeted near the 1.3865 level, assuming that we can even break down below what should be “market memory” in the form of the 1.39 level.
The 50 Day EMA is at the 1.3805 level and is rising. Ultimately, if it can cross above the 200 Day EMA, it becomes a longer-term “buy-and-hold” signal, sending the US dollar higher over the longer term, at least in theory. The so-called “golden cross” is a well-known indicator that people will use who think in terms of months, if not years.
Keep in mind that Canada continues to see its economy deteriorate, while the United States economy continues to run fairly hot. While the Federal Reserve is expected to cut rates, the reality is that they may not be as aggressive as people once thought, and as a result we are starting to see the US dollar strengthen a bit against a multitude of currencies, but when paired with the Canadian dollar, it should outperform many other major pairs by the time it is all said and done.
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