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Today’s Trading Edge: USD/CAD – No Inflation Concerns for BOC Means Loonie Poised to Decline

Posted by Edward Moya on Jun 4, 2014 12:04:00 PM


It came as no surprise that the Bank of Canada kept its target for the overnight rate at 1.0%.  While CPI inflation climbed close to its 2.0% target much earlier than expected, the Bank is believes higher prices are coming from temporary effects of higher energy prices.  Modest growth and weather effects on first quarter data will keep the bank waiting for new information before any policy shifts.

Earlier this week, USD/CAD (daily- chart) has just broken above short-term resistance and is currently respecting the 50-day SMA.  On my last loonie post, I highlighted the key selling interest region (red box) which initially targeted a reversal Gartley pattern around 1.0970.  The recent 5 day surge has price rallying past short-term resistance and price could now very well target the 100-day SMA at 1.1010.  The selling interest may be fading and if price takes out 1.1010, further upside could target 1.1130.  Key support will come from the 200-day SMA at 1.0750.      

Since the summer of 2011, USDCAD has been fairly bid until price made a 5-year high this March at 1.1277.  The current range that may persist over the next couple quarters may be 1.0750 – 1.1250.  The recent policy stances by both the Fed and BOC support range trading to remain intact for possibly the rest of the year.   

The trade: Buy USDCAD at 1.0910 with a stop loss at 1.0870 and a take profit at 1.0990.  The Risk/Reward Ratio is 1:2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading


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