The Canadian dollar is finally slowing down
Regarding the purchase, I have no interest in doing so.
The US dollar initially fell against the Canadian dollar during Wednesday’s trading session, but as the 1.20 grip neared, it is evident that we are starting to meet some support. The market is likely to continue to see a lot of volatility in this area, as the 1.20 handle is a large, round, and psychologically significant number. Also, we’ve shaped a hammer a bit so that suggests we might see a little bounce, but that bounce is more than likely to be sold anymore.
On the upside, I think the 1.24 grip is going to be massive resistance, but the 1.23 level is also an area that might cause a bit of trouble. In other words, I think it’s only a matter of time before we get the daily candlestick that we can start to short. With that in mind, I’m looking for signs of exhaustion that I want to take advantage of, but we’ve certainly been a bit oversold at this point. The 50 day EMA is also just above the 1.24 level, adding even more credibility to the resistance at this point.
On the other hand, if we were to fall below the handle of 1.20 on a daily close it would be catastrophic for the dollar as it would most certainly implode and go much lower. Typically, when you fall below the bottom of the hammer at a major number like this, it usually brings in even more negativity, which could hasten the downswing. I currently don’t see this as likely, but I should accept this trade if it comes up.
Regarding the purchase, I have no interest in doing so, at least not until we break well above the 50 day EMA on a daily close, maybe even the 1.26 handful. In other words, it is unlikely that I will, but it would be interesting to see if it happens. I think it would take some type of major shock to the system for that to happen. Yes, inflation was a bit higher than expected during the trading session, but longer term it’s only transient, and the Bank of Canada continues to cut its bond purchases.