- The USD/CAD has fallen against the Canadian dollar during trading on Thursday after the CPI numbers came out at 6.5% year-over-year.
- The market celebrated this because they believe that the Federal Reserve is going to start slowing down quicker than anticipated.
- The idea of 6.5% inflation year-over-year in the United States is absurd.
- In other words, the Federal Reserve still has a lot of work to do, but recently we’ve had some of the Fed speakers coming out and throwing more confusion into the market. I’m looking at you, head of the San Francisco Federal Reserve.
It looks like the market is ready to continue going lower, with the 200-Day EMA sitting underneath the 1.33 level, perhaps closer to the 1.3250 level. If the market were to break down below the 1.32 level, that would be very bearish for the US dollar, but at this point I think it’s more likely than not that we are going to go down to the 200-Day EMA over the longer-term, simply because it is the “measured move” of the rising wedge that got broken below. Some of these patterns are suspicious at best, and you need fundamental reasons to get moving. Right now, it looks like the oil markets are trying to help the Canadian dollar as well, but Canada is an absolute mess.
The Pair is Expected to be Very Noisy
Inflation is high in Canada, as I saw firsthand last week in the province of Québec. A strengthening Canadian dollar could help them, but as far as employment is concerned, the most recent Canadian employment figure was scorching hot, so that might be part of what we are seeing here, traders trying to bet on a loosening fat, and perhaps the Canadians having to fight inflation much longer than originally thought.
All things being equal, if we turn around and take out the 50-Day EMA, which is sitting just above the 1.35 level, then we allow for move to the 1.3750 level, where we have seen a lot of resistance. This pair will be very noisy, but that’s not very surprising considering that is quite often the normal state of this currency market as the United States and Canada are each other’s largest trading partners, and therefore a lot of the action that you see is done out of necessity.
Ready to trade our daily Forex analysis? We’ve made a list of regulated forex brokers in Canada worth trading with.