Many traders will struggle with this trade because they are so used to trading crude oil only.
The US dollar initially retreated against the Canadian dollar, but then turned around to show signs of life again. The market has been in a consolidation zone for some time, so it’s no surprise to see buyers returning to the center of the region. After all, the 1.25 level has been very important for quite some time, so one might have expected some buying pressure.
The 50-day EMA and the 200-day EMA sit just above recent trade action and are both stable. This suggests that the market will remain in a range, which is quite logical given that the Bank of Canada has just raised interest rates by 50 basis points and the Federal Reserve is expected to do the same shortly. In other words, we’re basically in a sort of equilibrium.
When you look at the chart, you can see that the 1.25 level has clearly been supported, while the 1.29 level has been resistant. In general, I think we will stay in this range, but it should be noted that there is a large hammer that formed when we drilled the 1.25 handle. If we can break it down below this level, which is basically the 1.24 level, it is likely that the market will start to break down at this point. In this scenario, it would probably have something to do with a sharp rise in the crude oil market, but it’s hard to imagine a situation where we get such a big move.
For what it’s worth, the US dollar was rising as oil markets did the same during the day, so the correlation doesn’t have to be constant, and in the situation we’re in right now, being stagflation at the globally, it’s most likely going to continue to be a loose connection at best. For this reason, I think a lot of traders will struggle with this trade because they are so used to trading crude oil only. The size of the candlestick during Thursday’s trading session was quite impressive, so it will be interesting to see if we can break above the 1.27 level, which would most likely open up the possibility of a move to the 1.29 level. .