The US dollar rallied against most currencies during the session on Tuesday, and the Canadian dollar was no different. We are pressing the 1.24 level, an area that is resistive, and is also the scene of a previous weekly uptrend line. This is an area of extreme volatility just waiting to happen, and I think that the next couple of days will tell us where we are going to go next. Because of this, I like the idea of sitting on the sidelines and waiting for a daily candle that looks rather impulsive to start putting money to work. The US dollar continues to strengthen in general, but at the same time oil markets do as well, that has me a bit concerned, as I think that it is very likely we will see a bit of back-and-forth here.
If we break down below the 1.23 level, I think at that point the sellers will probably try to push this market back down to the 1.20 level. Alternately, if we break above the 1.24 handle significantly, then I think that the market goes looking for the 1.25 handle, and perhaps towards the 1.2750 level after that. This is a market that continues to be very volatile, and I don’t think it’s good to be any different as the Bank of Canada surprised the market with a recent interest rate hike. At the same time, the Federal Reserve looks very likely to wind on its balance sheet, making the bond trade as cluttered and confusing as ever. Because of this, I do not expect much in the way of clarity, but once we get it I am more than willing to follow as it will be a significant sign of clarity in a market that desperately needs it.
Written by FX Empire