The USD continues to stabilize against the loonie
The Canadian dollar is weakening against many currencies, so this is a huge surprise.
The US Dollar initially pulled back a bit on Friday, but then turned around to show signs of life again near the 1.28 level. This is an area that has been backed many times over, and it’s likely that we’ll continue to see buyers trying to take advantage of “cheap dollars”. Keep in mind that the US dollar continues to see a lot of inflow, and I think we will continue to see that. After all, US interest rates continue to rise and the Canadian economy is beginning to suffer.
The oil market has been pretty strong, but frankly, the US dollar and crude oil can go up at the same time. After all, the US dollar is under a lot of pressure due to the demand for yield, but at the same time there is a lot of inflationary pressure, which is pushing crude oil higher. Also, I think it’s only a matter of time before we start to factor in even more supply disruptions, because while demand might drop a bit, the reality is that we’re at levels historically low supply in some grades.
The 50-day EMA is currently at the 1.2754 level as it begins to rally and offers some momentum support. Ultimately, I think every time we pull back, we’ll find buyers, and it looks like we’re going to make another attempt with the 1.30 handle. The Canadian dollar is weakening against many currencies, so this is a huge surprise. The money continues to flow into the United States, and I think that will be the theme for the next few weeks at the very least.
As the Federal Reserve continues to tighten and appear hawkish, a lot of money will be racing towards the safety of US bonds. Canadian bonds aren’t necessarily Third World, but they don’t have the same kind of appeal as US Treasuries. If we can break above the 1.29 handle, it is likely that we will go to the 1.30 level. If we break above the 1.30 handle, we are likely to go much higher, possibly reaching a new high.