The USDCAD pair failed at the neckline of an inverse head and shoulders pattern. The resistance level holds and sends the pair back to the projected neckline.
With the market reversing the post-Fed gains, and with the end of the week just around the corner, the chances are that we will see more consolidation ahead.
Yesterday’s Canadian CPI Did Not Impress
The Canadian CPI or Consumer Price Index did not impress. Released yesterday, it showed nothing but a mild improvement on an annual basis, 1.5% when compared to the 1.4% expected. However, the monthly release showed declining inflation, as well as the yearly trimmed CPI.
The Fed Signals Lower Rates for the Next Three Years
The main event of the week, and probably the main event until the U.S. presidential elections, the FOMC Statement and press conference dominated the headlines. The market traded in a range prior to the release, a range visible both on the lower and the bigger timeframes.
While some market participants expected more stimulus from the Fed, they got nothing but strong forward guidance. More precisely, the Fed promised to keep the rates lower until 2023 at a minimum.
However, the USD caught a bit of a bid tone as it follows the stock market’s performance closely. Because the stock market corrected at the close, the USD gained strength, and the USDCAD did the same.
USDCAD Technical Analysis
If a picture tells a thousand words, the USDCAD four-hour chart reveals how much trouble the pair has to find a bottom. Yes, the pattern looks like a head and shoulders, but it fails at the neckline once again.
Because of that, another push lower to the projected neckline might be in the cards, as that is where bulls will likely step in. To trade it, bulls must consider an entry at 1.3120 with a stop at 1.30 and a target beyond the measured move at 1.3460.
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USDCAD Price Forecast