Potential signal
- I am long in this pair already.
- However, I would initiate a new position at 1.4050, with a stop loss at the 1.3890 level.
- The target would be the 1.42 level above.
The US dollar rally during the trading session on Thursday against the Canadian dollar again, as we have seen plenty of upward momentum as of late, and it does appear that the Canadian dollar is on its back foot, which does make a certain amount of sense considering just how much economic headwind the Canadian economy is currently facing. Furthermore, the US dollar itself has been stubbornly strong, and if that is going to continue to be the case, then it makes sense that the Canadian dollar will not hold up well against it.
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Technical Analysis
We have been consolidating for some time now, and as a result it makes sense that we will continue to see a lot of questions asked about this market, but the fact that we have broken out of a consolidation area does suggest that we are in fact seen the US dollar rally a bit against the Canadian dollar, and we are on the verge of a fairly significant break to the upside.
The 1.39 level has been a significant ceiling in this market and has been tested for support. We ended up finding that support, and now on Thursday, we are taking off to the upside. Currently, we are threatening the 1.40 level, which of course is a large, round, psychologically significant figure, and an area that a lot of people will be watching very closely. If we can break above there, then it’s likely that the market looks likely to reach the 1.42 level. On the other hand, if we break down from here, we will retest the 1.39 level for support, and even if we break down below that level, the 200 Day EMA is at the 1.3868 level, offering plenty of support.
I have been saying for some time that the US dollar has been stubbornly strong, not only against the Canadian dollar but other currencies as well. At this point, I think we are about to see a higher surge in this pair. I have no interest in shorting this pair anymore as interest rate differential continues to favor the US dollar.
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