- The US dollar fell against the Canadian dollar pretty quickly on Thursday as the 10-year yield in America pulled back from an extended run higher.
- Ultimately, this is a market that I think continues to look at consolidation as the norm.
- And I am looking at this as a potential range-bound type of market.
We are currently hanging around the middle of what could be a larger range in form of 1.35 offering support and a 1.3750 offering resistance.
With that being said, the interest rate differential between these two economies is relatively tight so the interest rate play isn't as much of a factor as it once was. Crude oil of course has a major say in what happens with the Canadian dollar, just not against the US dollar.
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Range-Bound Consolidation
So, when I look at the USD/CAD pair, I suspect that we have a situation where traders are going to continue to bounce this pair back and forth. This probably moves right along with how the 10-year yield moves in America and as a result, I think you have to become somewhat bullish the closer we get to 1.3550 on the price chart and perhaps if we get another bounce in rates simultaneously.
If we were to break down below the 1.35 level, that would almost certainly signify some type of collapse in yields in the United States and therefore I think it would really probably be a situation where the US dollar is not just falling against the Canadian dollar, but it is probably falling against everything else as well.
If we were to break above the 1.3750 level, we would clear the 50-day EMA and probably see interest rates rise in the 10-year yield in America.
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