It certainly seems as if there are a lot of buyers right here where we are right now.
The Canadian dollar shot higher in value against almost everything during the trading session on Wednesday as the market has shown itself to be very pro-Canadian in the short term. After all, the CPI numbers in several other inflation numbers came out stronger than anticipated during the trading session, and therefore people are starting to bet on the Bank of Canada becoming a bit more aggressive than what they had stated previously.
That being said, the US dollar has crashed into the 1.25 level, an area that has been supported more than once. The 1.25 level has been the bottom of a larger consolidation area, so it is very important to see this area hold. So far, it has, and one has to wonder whether or not we are going to continue to see any momentum, or if we have simply fallen back to the bottom of the same range before we turn around and show signs of buying again.
The 200 Day EMA is at the top of the candlestick and therefore it is likely that it will continue to offer a significant amount of resistance, just above the 1.26 handle. Quite frankly, this is a market that I think continues to see a lot of noisy behavior in this general vicinity, and therefore it is going to be difficult to figure out our directionality until we get yet another impulsive candlestick.
If you look at the hammer from a couple of weeks ago, breaking down below that level could signify quite a bit of selling pressure. That is near the 1.24 handle, as it is an area where we had seen the market come in and start buying again. Breaking down below that level would open up a huge move lower, perhaps even dropping the dollar down to the 1.20 area. That obviously would be a big deal, so be interesting to see how that plays out. Ultimately, if we were to turn around and take out the 1.2650 level, then that could open up the possibility of a move to the 1.29 level eventually. Ultimately, this is a market that I think continues to see a lot of choppiness, but it certainly seems as if there are a lot of buyers right here where we are right now. In general, the next day or two should tell us a lot.