The U.S. dollar has rallied quite nicely against the Canadian dollar during the trading session on Friday, in a bit of a “risk off” type of move. At this point, it’s likely that the 1.35 level will be violated again and broken. If that’s the case then we have a clear target based upon recent consolidation of 1.36, which would make quite a bit of sense as there are concerns about the trade war yet again. If that’s going to be the case, then commodity currencies will get hammered as this pair would have a bit of a “double whammy” attached to it as money also will fly into the U.S. Treasury markets, which are making fresh highs, offering extraordinarily low yield in an environment that is decidedly negative.
As long as bonds do well, the U.S. dollar should continue to strengthen. This will of course be against all commodity currencies and not the least of which Canadian dollars, as the Canadian economy isn’t that hot right now. There are a lot of concerns when it comes to the housing market, which has been slowly deflating for some time. GDP numbers aren’t that exciting, but we recently had a strong jobs number out of the Great White North, so there is a lot of confusion when it comes to the economic picture.
With that, most traders feel much more comfortable owning dollars in a situation that is “as clear as mud.” To the downside, we have a significant amount of support at the 1.34 handle, which should offer a somewhat significant “floor” in the market. Buying on the dips will probably continue to be the way people trade this market, and you should keep in mind that this pair does tend to chop around as the two economies are so heavily intertwined.
U.S. Dollar Shows Strength Vs. Loonie
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