(MENAFN- Daily Forex)

• The U.S. dollar traded choppily against the Canadian dollar on Wednesday, holding above key support at 1.40.
• With a Golden Cross in place and rate differentials favoring the greenback, the pair could target 1.4250 if bullish momentum persists.

The U.S. dollar has been noisy against the Canadian dollar during trading on Wednesday, as we sit above a crucial support level in the form of 1.40. The 1.40 level is an area that previously had been significant resistance, and we broke above there, pulled back, broke above it again, and now we're testing this area yet again. The 1.40 level is an area that a lot of people will be watching very closely, as it is a large, round, psychologically significant figure and an area that has been very noisy as of late.

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The 50-day EMA crossed above the 200-day EMA back in the middle of October, kicking off the so-called Golden Cross, which is a bullish sign for longer-term traders. Ultimately, the 50-day EMA rallying at this point could pressure the 1.40 level as support also. If we can break above the top of the inverted hammer that formed on Tuesday, that would be another bullish sign, and I would, of course, look at that as a buying opportunity.

EURUSD Chart by TradingViewInterest Rate Differential

Keep in mind that the interest rate differential continues to favor the U.S. dollar, and that is a bonus here. You get paid to hold on to the U.S. dollar in this pair from quite a wide interest rate differential, as Canada has very low rates at the moment. While the United States has cut rates, the bond markets don't really seem to care, so therefore that differential has stayed somewhat consistent.

Given enough time, I fully anticipate that this pair could go looking at the massive sell-off point back in April, which would be right around 1.4250 or so. I have no interest in shorting this pair, at least not until we see some type of big sell-off in the U.S. dollar in general.

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