It certainly looks as if we are going to go higher than lower.

• The Canadian dollar initially fell on Wednesday to reach down toward the ¥104 level.
• The ¥104 level is an area that has been previous support, soit’s not a huge surprise to see this market turnaround and show signs of life.
• In fact, by the end of the day, the pair ended up forming a bit of a hammer, which is telling considering that the crude oil market recovered quite nicely as well.

The 50-day EMA is at the ¥103 area and rising, and because of this, it’s very likely that we continue to see more of a “buy on the dips” type of attitude. This is especially true considering that the Bank of Japan is doing everything it can to work against rising yields, thereby essentially buying as many bonds as it takes. That is the same thing as printing currency hand over fist, so we should continue to see the Japanese yen suffer as a result.

Pay Attention to Crude Oil

However, you should keep in mind that the Canadian dollar is highly levered to the crude oil markets, so pay attention to how they are behaving to get a feel for how the Canadian dollar will do. In other words, if the crude oil market recovers, then it’s likely that we would see the pair do quite well. However, if oil takes a bit of a dip, it could either turn this market around and make a breakdown, or it may work against the upward momentum.

This looks like a market that is trying to do everything it can to show signs of life, and I think we continue to consolidate back and forth. The 50-day EMA might be reason enough for people to get long, but really at this point, I think what we are seeing is the market trying to chip away at the ¥106 level. The attitude of the market remains very noisy, so you should be very cautious about your position size. Regardless, it certainly looks as if we are going to go higher than lower. However, if we were to break down below the ¥100 level, that could change a lot of things as it would almost certainly have a certain amount of psychology working as well.

The US dollar has been strong for some time, and it should continue to be so. 

The US dollar broke higher on Tuesday to test the top of a major channel. At this point, crude oil markets are also starting to fall apart, so that does have a massive effect on the CAD. With this, and the fact that the US dollar is relatively strong anyway, the move does make quite a bit of sense. Ultimately, I think this is a market that will continue to see a lot of noisy behavior, but whether or not it respects the channel is a completely different question.

Looking at this chart, it is probably worth noting that the most recent low tested the 50-Day EMA, but then the market turned around to show signs of life again. The huge candlestick for the trading session on Tuesday suggests that there is significant buying pressure, and I like the idea of a potential breakout above the 1.31 handle. If we do break above there, then the market is likely to go much higher. This is a market that has a well-defined channel that we need to pay close attention to. The overall attitude of the market is bullish, so you need to understand that you should be favoring the upside anyway, although the Canadian dollar has been a fighter.

If we were to turn around and break down below the 50-day EMA, it’s possible that the Loonie could look to the 200-day EMA near the one .27 level, and then possibly down to the 1.26 level after that. That is essentially the bottom of the channel, so if we were to break below there, then it’s likely that we fall apart completely.

This is a market that I think is starting to price in the idea of oil struggling, especially as there has been a major concern out there when it comes to the idea of global demand, something that should not be very positive for this market as it looks like people are struggling. That should continue to weigh upon oil, so we will have to wait and see either way. The US dollar has been strong for some time, and it should continue to be so. However, if there’s one currency that can give it a huge fight it will be the Canadian dollar due to the fact that there is so much cross-border transacting between the two.

Expect lots of choppy volatility, but with an upward slant.

The Canadian dollar pulled back a bit on Friday, reaching down to the ¥105 level. This is an area that would attract a certain amount of attention due to its large, round, psychological aspect of it. Ultimately, I think that we could go a little bit further, but a lot of this is going to come down to whether or not we can continue to see momentum come into the market.

This is an interesting pair for me, because the crude oil market has a huge influence on the Canadian dollar, as Canada is a major exporter of the commodity. As a general rule, if crude oil starts to rally, we will see a lot of bullish pressure on the Canadian dollar as well. On the other side of this equation, Japan imports 100% of its crude oil, so it does make a certain amount of sense that it has such a high correlation to crude oil.

Adding even more fuel to the fire is the fact that the Bank of Japan is doing everything it can to keep interest rates low, with the 10-year JGB target rate being 0.25%. In fact, the Bank of Japan has suggested that it is willing to buy “unlimited bonds” in order to keep this market down. That is the same thing as printing unlimited yen, so it makes sense that the currency will continue to struggle. At this point, I think most of the market pulling back is a reflection of an overstretched condition. However, we are still very much in a bullish market, and it does make quite a bit of sense that we will eventually see buyers come into this market to take advantage of value.

The 50-day EMA is approaching the ¥101 level and rising. The ¥102 level was the previous resistance barrier, so I think at that point we could see a little bit of support as well. This is a market that I think will continue to see a lot of upward pressure regardless of what happens next, with perhaps the lone exception being that if we get a complete “risk-off” type of environment, then sometimes the Japanese yen will become attractive. Either way, the trend is clear at this point. Expect lots of choppy volatility, but with an upward slant.

The US dollar has fallen significantly during the trading session on Tuesday after initially trying to break above the 1.26 level. This is an extraordinarily negative move, and at this point, we are threatening a major trend line. The trend line is two years old, and the something that a lot of people will be paying attention to. Ultimately, I think this is a market that will find plenty of volatility based on where we are at.

If we were to break down below the uptrend line, then it opens up the possibility of a move down to the 1.24 handle. In that scenario, we probably go much further to the downside, perhaps driven by the value of oil more than anything else. While the US dollar is relatively strong against most currencies, it is worth noting that the Canadian dollar has been an outlier. At this point, I think the market is going to have to make a bigger decision, because of the breakdown through this uptrend line it could be a sign that the Canadian dollar is going to take off.

Alternately, if we turn around and bounce it could show continued determination to drive the Canadian dollar higher, right along with oil. It’ll be interesting to see all this plays out because there is a significant cluster right here as well when you look to the left. Given enough time, we more than likely will have to make some type of bigger move, and we should get in impulsive candlestick rather quickly. This has been a brutal selloff, and it looks like there’s no real end in sight unless this trendline holds. If it does not, it becomes more of a “sell and hold” type of situation.

If we turn around and break above the highs of the trading session on Tuesday, that could send this pair back to the upside, but I do not think that is likely to happen easily, at least not without some type of action coming out of the Federal Reserve, or perhaps the inflation numbers coming out on Friday in America. Oil spiking would of course have the exact opposite effect, but if it does sell off, that could set this pair higher. We are at a major decision point, so wait for the market to tell you where it’s going to go and then follow it.

Expect choppiness as per usual in this pair, but as long as we stay in the channel it’s easier to buy this market than to sell it.

The US dollar fell hard on Monday against the Canadian dollar as crude oil continues to attract a lot of attention. When you look at the longer-term chart, you can see that we are clearly in a massive channel, and now it looks as if we are trying to get to the bottom of it. Because of this, I would anticipate further downward pressure, but I would also expect a certain amount of support at the bottom of the channel. That is essentially the 1.2550 level and is rising as time goes along.

There are a couple of things to keep in mind at the moment. We just sliced through the 200-day EMA and look likely to close at the very bottom of the range. Having said that, it was also Memorial Day in the United States, meaning that most US-based traders were not online. I don’t know that it would have changed much, because oil continues to rise, but the drop may not have been as drastic.

If we do rally at this point, the 1.28 level would be a significant short-term resistance barrier to overcome. If we can break that, then it is likely that we go looking to the 1.30 level. Breaking above there then means that we will threaten the top of the channel. While the recent action has been very bearish, if you look back almost a year, we have been gradually rising over time. Because of this, I would anticipate that the channel should hold, and certainly would be interested in buying the US dollar on some type of balance in that general vicinity. However, if we were to turn around and break down below the 1.24 level, it’s likely that the US dollar would be in serious trouble.

In the massive “risk-off environment” that we seem to be in, it’s difficult to imagine that the US dollar will melt down against the Canadian dollar. That doesn’t mean that the Canadian dollar cannot rally, especially with oil spiking the way it has. This might be one of those situations where the Canadian dollar does much better against the greenback than many other currencies, but that doesn’t necessarily mean that it needs to run it over either. Expect choppiness as per usual in this pair, but as long as we stay in the channel it’s easier to buy this market than to sell it.

In general, this is a market that I think continues to see a lot of volatility, but it does certainly look as if it still favors the upside.

The US dollar bounced a bit on Tuesday ends the 50-day EMA has brought in some fresh buying. The market bouncing from that level, and the 1.28 level for that matter, does suggest that we are still trying to pick up our feet. The US dollar has been trying to build up a bit of a base over the last couple of days, and now it looks like we are trying to perhaps even build up enough momentum to take off to the upside.

If we can break above the 1.29 level, then it’s likely that we will test the 1.30 level above, which is where we have pulled back from. That area is of course going to be resistance, and at this point, I think it does make for a nice short-term target if we continue to see strength. On the other side of the equation, you should also pay attention to the crude oil market, because it does tend to help the Canadian dollar. However, both the US dollar and the crude oil markets can rally at the same time.

It’s worth noting that the market has been grinding higher over the last couple of months, and we have pulled back to roughly 50% of the initial move. If we can break above the highs from a couple of weeks ago, then it’s likely that the US dollar could go reaching C$1.33 or more. Short-term pullbacks offer value that a lot of people will be interested in, and I think it continues to be a “buy the dip” type of setup. If we break down below the 50-day EMA, then the market could go looking to reach the 1.27 level, but we also have the 200-day EMA as well.

I don’t really have a situation where willing to sell this market anytime soon, because if I were to trade the Canadian dollar based on the oil market, then I would get long CAD/JPY. In general, this is a market that I think continues to see a lot of volatility, but it does certainly look as if it still favors the upside. The interest rate differential and of course “risk-off attitude” could help the greenback against most currencies, including the Canadian dollar as we have seen.

At this point, I look at any significant pullback as a value play that you can take advantage of.

The Canadian dollar pulled back on Friday against the Japanese yen to reach the ¥101 level. The reason I am writing about this pair is that the Canadian dollar against the Japanese yen is an excellent way to trade the oil market in the Forex world. That being said, the most recent move has been more about the Bank of Japan and its quantitative easing policy, as they are trying to keep the 10-year JGB yield at 0.25% or lower. In other words, they have been “printing yen.”

If we see the crude oil market take off to the upside, this might be the perfect vehicle to trade that market if you do not trade oil itself. Not only will you have the Bank of Japan helping you, but the Canadian dollar is a proxy for crude oil, as Canada exports so much of the commodity. It is worth noting that we formed a massive shooting star during the trading session on Thursday, at the ¥102 level.

Looking at this chart, we could drop down to the ¥100 level, which is a large, round, psychologically significant figure. It is also an area where we had pulled back from previously, so it does make sense that we may have to retest it for “market memory” going forward. A pullback to that area that shows signs of support might be a nice buying opportunity, depending on the daily candlestick.

The market has been very bullish for quite some time, but it is worth noting that the trajectory of the bullish run is at a lower angle than it had been previously. When you look at this chart, it does look like we are getting close to a top, but I think it is probably only a matter of time before we pull back. A pullback would be a good thing because the market has gotten far too ahead of itself. It is also worth noting that the most recent inflation numbers coming out of the Canadian government over the last week have been extraordinarily bullish for interest rate hikes, which of course drives up the Canadian dollar as well. At this point, I look at any significant pullback as a value play that you can take advantage of.

Be cautious, but I do think a small range-bound trade should continue to be the way forward.

The US dollar went back and forth on Tuesday as we are hanging about the 50-day EMA, as well as the 200-day EMA. These are a couple of moving averages that have been relatively flat lately, and now that we are at that area, it is worth noting that the market is going to continue to pay close attention to the crude oil market because the Canadian dollar is so sensitive to that market.

The 1.25 level underneath should continue to be supported, as it has been massive in its importance over the last several months. We also had formed a massive hammer in that area, so it shows just how interested buyers are in that area. On the other hand, it is worth noting that the 1.29 level above is a major resistance barrier, and as we have gotten rather close to the middle part of the range, it does make sense to see the market stay in this area. If we can break above the 1.27 level, we could likely go much higher, perhaps reaching the top of the range yet again. On the other hand, if we were to break down below the bottom of the candlestick, then we may have to revisit the 1.26 level, followed by the 1.25 level.

This pair does tend to be very choppy overall, which makes sense considering that the two economies are so intertwined. It is the largest land border in the world, and it has a significant amount of trade going across it. Because of this, the two currencies are traded back and forth quite extensively, making it not only very liquid but also somewhat contained in general. It is not until we break out of this range that I would look to place a bigger position, and as the market has been so tight in this area, I think it is probably only a matter of time before we see another attempt to break out, but as long as we stay here, I think a nice range-bound trading system will be the best way to handle this very lackluster currency pair from a longer-term standpoint. Be cautious, but I do think a small range-bound trade should continue to be the way forward.

In the short term, it is going to be very choppy with an upward tilt.

The US dollar has rallied significantly during the trading session on Thursday to continue the recovery against the Canadian dollar. The 1.25 level has offered significant support multiple times, and it looks as if we are rallying away from that level. The 50 Day EMA above is offering a bit of dynamic resistance, and it has broken down below the 200 Day EMA. That being said, this is a range-bound market so, therefore, moving averages do not mean too much.

Looking at this chart, the market continues to see a lot of noisy behavior, as is clearly defined by the floor at the 1.25 level, and the ceiling at the 1.2850 level. Ultimately, this is a market that I think continues to go back and forth over the longer term, and perhaps on the whims of the crude oil market. Remember that the Canadian dollar is highly levered to the crude oil market, which is in the process of breaking down. If that continues, then I anticipate that the US dollar will rally from here and eventually make its way to the top of the rectangle that I have marked on the chart.

On the downside, if we do pull back from here, I think there is plenty of support at the 1.25 level to keep the market afloat. In fact, we have already tried to break the market down below there more than once, both times ending up in significant hammers. As long as that is going to be the case, it looks as if there are a lot of defenders in that general vicinity, and therefore a breach of the hammer from the Tuesday session would be a very negative turn of events, wiping out the 1.24 handle, an opening up a move down to the 1.22 level.

Keep in mind that this pair does tend to be very choppy in general, as the United States and Canada do so much cross-border business. Ultimately, this is a market that I think continues to see a lot of back and forth, but it does look like we are trying to find some type of reconciliation to the upside. I do not necessarily see that this market could break out above, but that could be an argument to be made on longer-term charts. In the short term, it is going to be very choppy with an upward tilt.

I think that selling is all but impossible until we break down below the hammer.

The US dollar rallied significantly on Wednesday to break above the top of the hammer from the previous session, suggesting that we are in fact trying to recover overall. The market continues to hang about the 1.25 handle, which is a large, round, psychologically significant figure, and an area where we have seen a bounce previously. Because of this, I think it is more likely than not that we are going to see an attempt to stay within the longer-term consolidation area.

Another thing that helps the idea of this going higher is the fact that the FOMC Meeting Minutes were a bit more hawkish than a lot of traders had anticipated, and we have seen a spike in the US dollar overall during the trading session. Furthermore, the crude oil markets have broken down rather significantly as a surprise inventory builds and a softening of demand for gasoline has come into the picture as well. Looking at this chart, it is likely that if we can break above the top of the candlestick for the trading session on Wednesday that could open up a move to the 50-day EMA, perhaps even as high as the 1.28 level over the longer term.

The alternate scenario is that we will turn around and break down below the 1.24 handle, which would be a breakdown of the hammer that we had just formed. If you break down below the hammer, then it is going to be very negative for the US dollar, and we could see a spike in the value of the Canadian dollar. Because of this, I think is very likely that the selling pressure would pick up drastically and it could speed up.

That being said, when you look at the candlesticks over the last couple of weeks, we have seen the real body of each candlestick trend, and now we are starting to swing in the opposite direction. The explosive move during the trading session on Wednesday could be the beginning of a complete recovery, but obviously, it is going to take some time to determine whether or not that is going to be the case. Because of this, I think that selling is all but impossible until we break down below the hammer.