Top Story

USD/CAD forms major bottoming pattern ahead of FOMC minutes

Since establishing a two-year low just above the 1.2400 handle in late July, USD/CAD has formed a clear reversal pattern – a V-bottom – characterized by a sharp bullish reversal resembling the letter, “V.” USD/CAD often tends to switch directions with this type of an abrupt reversal pattern, as the beginnings of trend changes in this currency pair can be relatively swift events. Currently, this reversal pattern has pushed USD/CAD up to approach the key 1.2800 level, which is also where the 50-day moving average currently resides.

This week, the short-term trajectory for the currency pair will depend to a large extent on how the markets interpret the Federal Reserve’s latest monetary policy stance when the minutes of the late-July FOMC meeting are released on Wednesday. Any hawkish nuances from the minutes could transform what was considered a relatively dovish meeting at the time into new-found fuel for the battered US dollar.

Also featured this week will be key inflation data from Canada in the form of July’s Consumer Price Index (CPI). Prices are expected to have remained steady after the previous month’s -0.1% drop. Another lower-than-expected CPI reading could weigh further on the Canadian dollar, boosting USD/CAD even more. Also potentially supportive of USD/CAD would be extended pressure on crude oil prices, which could continue to weigh on the energy-correlated Canadian dollar.

As noted, the recent rise of USD/CAD in the past two weeks has brought the currency pair up to approach key resistance around the 1.2800 handle and the 50-day moving average. If a continued rise for the pair amid this week’s critical economic events is able to overcome this resistance, it would confirm the strength of the current bullish reversal, potentially propelling USD/CAD back up to the key 1.3000 psychological level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT