The US dollar drifted a bit lower during the trading session on Wednesday against the Canadian dollar as the weekly trendline that had been broken recently has offered resistance. Overall, this could be a nice pullback that offers a selling opportunity traders are willing to take advantage of. On a fall from here, I think that the market will initially go looking towards the 1.21 handle, and then probably the 1.20 level after that. The US dollar is of course under scrutiny as the Federal Reserve looks very unlikely to be able to raise interest rates in the short-term due to the hurricane damage, and of course oil markets have been rallying so that makes a bit of sense as to the Canadian dollar strengthening. However, we have seen a certain amount of negativity around Canada as of late, but I think this is a short-term blip more than anything else.
If we were to close on a daily chart below the 1.20 level that would confirm the downtrend strengthening and not weakening, and that of course has a lot of influence on this market. On the other hand, if we were to break above the 1.24 level, I think that it would be a strong signal that the US dollar is to pick up against the Canadian dollar. That seems very unlikely though, even though lately it has been a bit bullish. I expect volatility, as the 2 economies are so highly correlated. However, I think that breaking below the weekly uptrend line was a significant turn of events, and technically speaking, ended the uptrend. Of course, having said that, anything can happen so being diligent with your stop losses will be paramount in the short term as the market tries to figure out which direction to go next.
Written by FX Empire