US dollar rallies against Canadian dollar after trade spat

The US dollar gapped higher at the open on Monday, reaching towards 1.30 level above before pulling back. We have pulled back to find support underneath, and then turned around to break out to the upside. The 1.3050 level looks like resistance as well, and I think that it’s only a matter of time before we break through there based upon what I am seeing in the charge. Beyond that, we have “higher lows” over the last several sessions, and I think that we are trying to build up the necessary momentum to finally make the breakout. It might be noisy and difficult over the next couple of sessions, but I believe that buying the dips gives you an opportunity to pick up a bit of value.

Beyond that, the crude oil markets have been struggling a bit as we have a large build in inventory, and that of course works against the value of the Canadian dollar. Beyond that, any type of extension of tariffs or move towards a trade war will certainly end up very negative for Canada, as the United States has much more flexibility and economic power than their neighbors to the north. We could fall enough to fill the gap, but at the end of the day I think it’s only a matter of time before the buyers prevail. If we were to break down below the 1.2850 level, then I would short this market, but it’s not until then.