US dollar falls against Canadian dollar during the week

The US dollar has initially tried to rally during the week but then broke down below the 1.2750 level to show signs of weakness, but then bounced a bit on Friday to show signs of support. The market looks as if it is ready to reach towards the 1.30 level again if we can find that support, but if we break down below the weekly candle, we could drift down to the 1.25 level over the longer term. Keep in mind that this market is highly sensitive to what’s going on in the oil markets, as the Canadian dollar is considered to be a proxy for oil in the currency world.

It will be very interesting to see how this plays out, as there is so much choppiness longer term. It looks as if the 1.2750 level is essentially “fair value” in the short term though, so I would wait for either a significant bounce, or breakdown below the candle stick of the week to put money to work. I believe that this market is trying to form some type of trending channel again, but I think there is going to be a lot of noise due to oil and of course the Toronto housing bubble. This is can be a very interesting year for this pair, but it does look as if we have a general slant to the upside, at least until we would break down below the 1.25 level. It’s going to be noisy in choppy trading, so I would keep my position size small.