- The US dollar initially rallied against the Canadian dollar on Tuesday but then gave back gains to show there is still a bit of hesitation at the moment, as there are a lot of questions about the Federal Reserve and what its plans are for interest rates going forward.
- Furthermore, there are some questions as to where things go with the US government and a potential shutdown looming.
This Pair is Different
It is worth noting that this is a market that is a bit different from many other currency pairs, as there are a lot of cross border trades that happen between the two. The US accounts for 25% of Canadian GDP in the form of exports that are sent south. If the US economy were to change and slow down, this actually hurts Canada just as much, if not more. Because of this, sometimes the market does the opposite of what some traders will expect.
Technical Analysis
The technical analysis for this pair is somewhat bullish at the moment, but I think that we have a bit of resistance just above, but there is also a bit of market memory at the 1.39 level. This was the top of the previous rectangle that we had traded in, as the market was bouncing around between 1.37 and 1.39, and then broke higher to show strength. At this point, the market will now have to prove itself as to whether or not it will offer “market memory”, showing support for price.
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The Non-Farm Payroll announcement comes out on Friday, as traders will be looking to see if there is a reason for the Federal Reserve to keep rates higher for longer. In the meantime, the market seems to be in a state of flux, trying to determine where we are going to surge to. This pair tends to be choppy, with the occasional impulsive move.
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