The US dollar went sideways initially during the day on Tuesday, hugging the 1.30 level. A breakdown below there should then show selling opportunities going forward. I believe that short-term rallies should continue to be selling opportunities, and it’s not a market that I’m willing to buy until we break above the 1.3050 handle. The market then looks likely to reach towards the 1.29 handle, and then possibly the 1.28 level after that. The oil markets have been rallying as of late, and that of course has put downward pressure in this pair. If that continues, then we should continue to fall apart. However, the oil markets are finding quite a bit of resistance above, and I think it’s only a matter of time before the oil markets roll over and perhaps in this market to the upside. However, we should break the aforementioned 1.3050 level to start buying.
Volatility, and the bond trade
We should continue to see volatility in the oil markets, which of course is nothing new. After all, we are oversupplied and the markets are simply having a bit of a relief rally. However, we also have a bond trade that’s starting to come into its own, selling US treasuries, while buying Canadian bonds. This is a bit that the Bank of Canada will continue to tighten monetary policy, as the economic indicators are sending the look a little bit better in Canada. If that is a thing, this pair should continue to go lower. The market was very low volume during the Tuesday session, so the breakdown that we had seen during American trading would have been all but able to be ignored, because essentially it would’ve been just Canadians trading, which of course is much less significant than the entire North American continent.
Written by FX Empire