The US dollar has plummeted against the Canadian dollar on Tuesday, but still looks to be supported below, despite the tough day. Even though there was selling, has anything truly changed at this point?
- The US dollar has plummeted against the Canadian dollar during trading on Tuesday, as we have seen significant US dollar weakness.
- That being said, this is mainly driven by noise coming out of Greenland and the tariff situation. So, I anticipate this is somewhat short-lived.
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Eventually, one of these people involved in all of this drama will certainly flinch, and that will get that out of the way. That's been the pattern the entire year. I don't see that changing here.
Now, with the US dollar against the Canadian dollar, oil is finding a little bit of support, so that does help the Canadian dollar to a point against the US dollar. Ultimately, though, I think you've got a situation where we had fallen pretty drastically, tested the 200-day EMA, and now we are pulling back.
I do think it is probably only a matter of time before the buyers return, and it's only going to take some type of headline like the EU and Trump agree to X, Y, or Z. While that doesn't directly have ties to Canada, it is more or less a reaction in the US dollar that I'm counting on.
Interest Rate Differential
The Bank of Canada is flat while the Federal Reserve remains stubbornly tight despite the fact they are expected to cut a couple of times this year. The reality is that the interest rate differential still favors the US, and that is something that you have to take into account eventually.
Pay particular interest to the 1.3750 level; that could be a floor. If that gives way, then 1.3550 would be tested next.
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