US dollar breaks higher against Canadian dollar

The US dollar has rallied significantly during the trading session on Tuesday, breaking above the 1.29 handle. By doing so, it looks as if we are going to make another attempt at the 1.30 level, but we have got a bit overextended during the day. I think that a short-term pullbacks should be a nice buying opportunity, and that will be especially true if the crude oil markets tank. If they start to fall, that of course will put even more upward pressure here. However, this move was incongruence with the US dollar strengthening around the world, and it looks likely that the market will again try to breakout above the 1.30 level, but it’s going to take a lot of effort. It certainly won’t be in one fell swoop like we are seeing on Tuesday, so a pullback is not only likely, but it’s necessary to build up the momentum to go higher.

I like the idea of looking at the 1.2850 as an area that is support, as we have formed a recent “bottoming pattern” from the 1.2750 level. I think that it’s only a matter of time before value hunters come back into the marketplace looking for an attempt to go higher, perhaps building up the necessary momentum needed for a longer-term breakout. If we did break down below the 1.2750 level, at least on a daily close, I think that we could go down to the 1.25 handle.