US dollar continues noisy grind against Canadian dollar on Tuesday

The US dollar has rallied initially during the day on Tuesday but ended up finding resistance above, only to turn around and fall significantly. The 1.28 level underneath could be supportive, and I think that support extends down to the 1.2750 level, an area that is much more important on longer-term charts. I believe that if we can break above the 1.29 level, then the market probably goes looking towards the 1.30 level, an area that I think will determine where we go for quite some time. It’s going to take several attempts to break above there, but if interest rates in the United States continue to climb, I think that’s exactly what happens. The oil markets will exacerbate this bullish pressure if they roll over, which of course is negative for the Canadian dollar.

The alternate scenario of course is that oil spikes, and perhaps interest rates in America fall. If that happens, then we could reach towards the 1.2750 level underneath. If you break down below that level, the market could go down to the 1.26 handle, perhaps even lower than that. The 1.25 level under that would be the longer-term target, an area that has been important more than once. I expect a lot of volatility in this market, but I also recognize that we will probably continue to see the US dollar, in focus as treasury markets continue to offer higher yields. As that happens, more money comes back in looking for greenbacks to pick up those notes. In general, this is a market that I think continues to be very volatile, but I do favor the upside.