- We have seen the US dollar plunge against the Canadian dollar during the trading session on Wednesday after the CPI numbers came out lighter than anticipated in the United States.
- It's also worth noting that we formed a couple of shooting stars in a row, so it suggested that we were likely to pull back.
- The CPI numbers being smaller than anticipated suggests that traders are already starting to price in the idea of the Federal Reserve loosening its monetary policy.
We had the FOMC meeting later in the day and the press conference could have a major influence on what happens next. This is a pair that I still like the idea of buying and not selling because the Bank of Canada has already cut rates and is likely to continue doing so.
As the US Goes, So Does Canada
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Let's just say for a second that the US economy does start to unravel a bit. Canada is extraordinarily sensitive to this and therefore traders tend to run to the US dollar in that environment as well. We are in the midst of forming something along the lines of a rounded bottom. We are approaching the 50-day EMA and I think the 1.36 level is a major support level so...All I'm doing is waiting for the markets to stabilize, and then perhaps after the press conference, if we get signs of US dollar strength, I'll probably buy there.
At this point, I think that the US dollar could very well go looking to the 1.39 level, which was a major resistance barrier in the past. A little bit of patience probably goes a long way in this market right now, as you should get an opportunity to find some type of value. Ultimately, USD/CAD is a pair that I still like, and the kneejerk reaction could end up being a bit of a gift, depending on how the press conference ends up going.
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