- The US dollar has pulled back slightly against the Canadian dollar during the trading session on Wednesday, as we are now testing the 50 Day EMA.
- That being said, there is still a bit of a disconnect in this market as the Canadians don’t have a deal with the United States, and despite the fact that the rest of the world has pretty much come to terms with the Americans.
- With this, and the fact that we have the Canadian employment figures at the end of the week, I’ve been watching this pair very closely. Because of this, I would anticipate that the next day or 2 might be somewhat quiet, but by the time we get to Friday, you could see a fairly big move.
Technical Analysis
As we look at the chart, the first thing that comes to mind is that the 50 Day EMA sits just below current trading and could offer a little bit of short-term technical support. Ultimately, this is a market that has recently been consolidating, but has since broken out to the upside, and now it looks as if the market participants are trying to retest the previous resistance for potential support. If we can break above the 1.38 level, then it opens up the possibility of an attack on the 1.3886 level, where the 200 Day EMA currently resides.
On the other hand, if we break down from here we could go looking to the 1.36 level, but I think we would need to see a huge divergence between the US and Canadian economies, something that just doesn’t happen most of the time. With this being the case, I still believe that the US dollar could very well rally from here, but you should also keep in mind that the US dollar is struggling and other places, so while the Canadian dollar may get a bit of a reprieve because of that, the reality is that this is a pair that is completely different at times.
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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.
