Potential signal
The US dollar rose on Thursday despite the fact that interest rates in America have drifted a little bit lower. That being said, the interest rate situation in America is still very strong and of course the 10-year yield is still very high and as a result it does make a certain amount of sense that the US dollar continues to attract attention, especially against the Canadian dollar which has a lower interest rate.
In other words, you get paid to hang on to this trade and breaking above the 1.37 level now opens up the possibility of a bigger move to the upside. Because of this, I am watching very closely at the markets and how they are behaving in general as I think the US dollar will continue to be a potential winner across the board.
Interest rate dynamics and market sentiment
This continues to be the case mainly due to interest rates in America being so strong and of course the fact that there are so many people confused about what is or what isn’t happening in the Middle East. As long as we have mass problems trying to sort that out, the interest rate markets will continue to be very noisy.
If we can break above the 1.3750 level, then I believe the US dollar goes looking to the 200-day EMA against the Canadian dollar, which is currently at 1.3785. Breaking that opens up a move to the 1.3950 level. Ultimately, I am bullish of the USD/CAD pair, and I do think that we continue to see plenty of reasons for it to go higher, especially if oil starts to fall off. I buy dips, I don’t have any interest in selling at this point.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
