The US dollar had a very volatile session against the Canadian dollar as it was suggested by members of the Bank of Canada that they would be cautious about raising rates, and perhaps the Canadian dollar gained a bit too much after the recent surprise interest rate announcement. In fact, breaking above the 1.24 level was psychologically important, as it is the area from which the pair fell after that announcement. In other words, we have done a complete round-trip and the volatility continues. Because of this, I’m very hesitant to sell this pair suddenly, which has me flipping my live positions around. I think that if we can break above the 1.25 level, then things become much clearer, but until then I would anticipate a lot of bouncing around, and in decision. The pair tends to be very volatile anyway, but with oil markets rallying at the same time, that has the Canadian dollar showing signs of strength earlier in the session. In other words, this is an absolute mess.
I’m a buyer at higher levels
If we can clear the 1.25 level, then I’m a buyer. Alternately, if we break down below the 1.2325 level, then I start selling again. Ultimately, this is a market that’s probably best left alone until we can get the daily signal that’s necessary, something that we certainly don’t have yet. The Federal Reserve shrinking its balance sheet is probably the closest thing to tightening that we see in both economies, so I believe that it’s likely the buyers will eventually get there way. However, as I record this we are testing very significant resistance, and it is far too early to decide as to which direction we are going. All things being equal, volatility is probably the one thing you can count on.
Written by FX Empire