The US dollar has rallied during the Tuesday session, reaching towards the 1.25 level, which of course is a large, round, psychologically significant number. That area of course will offer a bit of resistance, but it looks to me as if the market is trying to build up the necessary momentum to rally, considering that we have made 3 “higher lows” on the hourly chart. We also have the gap from a couple of days ago, so we need to clear that before we can go higher for the longer term.
The Bank of Canada raised interest rates last week, and that of course did put a lot of volatility into the market. However, we also know that the Federal Reserve is likely to raise interest rates relatively soon, so interest rate differential will probably not be a major factor in this pair. I think that the oil markets will continue to be very important, so pay attention to those as well. The oil markets had gotten a bit overextended, so a pullback in the market is very possible, and that would put upward pressure in this market.
If we did breakdown below the 1.24 level, I think at that point the market would probably go down to the 1.23 level after that. I suspect that we will get choppiness more than anything else, as the Canadian and US economies are so highly intertwined as they are the largest trading partner of each other.
Written by FX Empire