At this point in time we’ll continue to see a lot of noisy behavior, but it certainly looks as if we are favoring the downside.
The US dollar has crashed through the 200 day EMA against the Canadian dollar during trading on Tuesday as the crude oil markets have broken out to the upside. That being said, it makes a certain amount of sense that the Canadian dollar would strengthen, especially as Jerome Powell babbled in front of the U.S. Senate and sounded a bit more dovish than I think a lot of people had hoped.
The fact that the candlestick is closing towards the very bottom of the range is of course a very negative sign and typically means there is going to be a significant amount of follow-through. Now that we are below the 200 day EMA, certain algorithms out there will favor the downside anyway, so it makes quite a bit of sense that we would continue to see a little bit of downward pressure and at the very least continuation for a day or two. At this point, the initial target is probably going to be the 1.25 handle, which of course has a certain amount of psychological importance placed upon it as well. That being said, I think the market probably continues to see a lot of the selling pressure to reach below there as well. In fact, we could drop all the way down to the 1.2350 region and simply be consolidating from a longer-term standpoint.
To the other side of the equation, we need to turn around a break above the 50 day EMA in order to get bullish. I think at this point in time we continue to see a lot of noisy behavior, but it certainly looks as if we are favoring the downside. It is very interesting to see a complete turnaround in the US dollar over the last day or two, as we have seen yields in America drop a bit or perhaps better put, struggle to rise further.
All this being said, we’re likely to continue see this market as one that will probably continue to flex its muscles to the downside, but more than likely it is going to be a grind lower, which makes sense considering that the two economies continue to rely on each other so heavily, so therefore the market does tend to be very choppy in general.
Source link
