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The US dollar rallied significantly against the Canadian dollar during the trading session on Thursday to reach towards the 50 day EMA as the crude oil markets got absolutely crushed. There were comments coming out of the Kuwaiti Oil Minister suggesting that there was going to be an oversupply of crude oil in 2022, which may have been part of the issue. Furthermore, Joe Biden has announced a vaccine mandate on US truck drivers, at least those who work for companies of 100 employees or more. There is a serious fear that truck drivers may be leaving their positions, thereby crushing demand for crude oil.
Whatever the reason, the reality is that the 50 day EMA comes into the picture, and it looks very likely to see a certain amount of selling pressure there. Furthermore, we also have the 1.25 level in that general vicinity as well, so all things being equal I do think it is only a matter of time before sellers come back in. This would be especially true if we get crude oil rallying again. At this point in time, it is likely that the Canadian dollar would strengthen, and as you can see, I have drawn a bearish flag. The bearish flag obviously has not kicked off yet, and there is no way to predict whether or not it will, but if we were to break down below the bottom of the very slight, it is likely that we go looking towards the 1.20 level.
Keep in mind that Friday is the jobs number in the United States, as well as Canada. In other words, there is going to be a lot of noise in this pair during the day. With that being said, I think you need to be very cautious, but we should get quite a bit more in the way of clarity when it comes to this pair at the end of the trading session. In fact, I think I would be a bit cautious about being involved for the next 24 hours, but we might get some type of nice signal heading into the beginning of next week. It certainly seems to be setting up for a big move, and at this point it still looks as if it is trying to tell us it wants to go lower but tomorrow needs to get out of the way first.
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