The USD/CAD pair went back and forth during the day on Wednesday as the markets saw quite a bit of volatility. This was because of two different announcements, the first one being the GDP number out of the United States, and the second one of course being the interest-rate decision and more importantly the statement that accompanies it out of the US as well.
The GDP number came in at the 0.2% level, which was well below the 1% expected number. With that in mind, the US dollar sold off rather aggressively as traders bet that the Federal Reserve would not be able to raise interest rates as soon as initially thought. However, later in the day the market was a bit surprised by the Federal Reserve statement which really hadn’t changed much. It still more or less in the wait and see category, which isn’t exactly bullish, but it isn’t as dovish as traders had been anticipating.
Oil markets
Oil markets didn't necessarily do much to help the Canadian dollar during the session as well, as we are still just below significant resistance. With that being the case, we ended up forming a hammer out the 1.20 level which of course is a large, round, psychologically significant number. In other words, it is more or less a perfect place to see something like this. The hammer suggests that the buyers are coming back into the marketplace, and on a break of the top of the hammer I feel that this market will probably head to the 1.23 handle next.
Oh, and if that isn't enough, we also have the 200 day moving average just below which of course attracts a lot of long-term traders, and the 38.2% Fibonacci retracement from the entire move up. There are a lot of things going on at one point on the chart, and as a result I can find several reasons to assert buying this pair if we go higher. We hadn’t retested the 1.20 level for support after breaking out above it, which is something that you often see as well. That being said, on a break out to the upside I am more than bullish.
