I think we have an opportunity to buying the US dollar at lower levels, and we should take it.
Obviously there will be a lot of volatility, but at the end of the day, in an overbought condition like this it does make a certain amount of sense that we would give back some of the gains. The 50-Day EMA sits right around the 1.32 level and is rising. I think that could be a significant support level, given enough time. The candlestick for the trading session was very negative, but it’s a bit much to think that the US dollar is suddenly going to turn around, or perhaps the Federal Reserve is going to suddenly change its monetary policy because the Reserve Bank of Australia only raised by 25 basis points. The market is getting way ahead of itself yet again, and this is going to lead to a lot of losses. This is a game that they’ve been playing for a while, and with a horrific CPI number coming within the week, and of course the jobs number on Friday coming out, there’s a good chance that this rips right back in the face of those that would be completely “risk on.”
That being said, the Canadian dollar is also going to get a little bit of a boost if OPEC does cut production, as is rumored. Remember, the Canadian dollar is highly sensitive to crude oil, so this might be a pair that does not snap back as quickly. Nonetheless, I do think this is a situation where you have to look at this through the prism of the US dollar itself, not so much the Canadian dollar. With interest rates dropping in America for the 4th day in a row, that really kind of put momentum in the US dollar selloff. That being said, things just got a little stretched and I think this is a simple correction. I would not put too much more into it than that, therefore I remain bullish, but may wait a while to get involved.