The U.S. dollar initially pulled back on Friday but turned around to show signs of life again. At this point in time, the markets are likely to remain noisy but bullish in the longer term. The interest rate differential will continue to favor the USD.
USD/CAD
We had gone straight up, and now, working off some of this froth, I think, makes a certain amount of sense. After all, currency pairs can't go in one direction forever, and we did, of course, get a very bad jobs report coming out of the United States on Thursday. But the biggest problem that the Canadian dollar has is that, sooner or later, what happens in America has a major influence on what happens in Canada. There are also some concerns about the trade agreements between the United States and Canada, as well as the United States and Mexico, and if that's the case, the U.S. dollar probably gets a boost from that as well.
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Market Outlook and Key Levels
Given enough time, it wouldn't surprise me at all to see this market go to the 1.45 level, but I think we've got some sideways action between now and then that we have to deal with. If we do break down from here, I'd be looking to re-buy the U.S. dollar closer to the 1.40 level.
It's really not until we break down below the 1.3950 level that I would start to think about selling. And even then, I wouldn't be overly concerned about getting short. Quite frankly, if the U.S. dollar starts to fall apart, there are other currencies I'd rather own, such as the British pound.
Ultimately, I do think that we will go higher given enough time, but you might have to be pretty patient here. USD/CAD is a pair that tends to be grinding, and not one that flies typically.
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