Technical Analysis USDCAD : 2014-10-30


Oil or FOMC?

Yesterday the Federal Open Market Committee (FOMC) minutes revealed the statement confirming the QE3 completion in late October. This decision will result in a steady volume reduction of long-term government bonds purchases. Note that the US Q2 GDP rose 4.6% YoY. Besides, it is planned to keep interest rates at 0-0.25% per annum to maintain economic development with the help of available commercial loans. The main determinants of monetary policy remain to be unemployment and inflation rates. As it was pointed out in the statement, the base rate may be revised only in case the rate exceeds the threshold of 2%. The FOMC statement caused a significant dollar consolidation against the most liquid currencies.
Today we expect the quarterly US GDP release and Unemployment Claims. If the indicator values are at the expected level, we should wait for the general trend to be continued. A relatively modest reaction is observed only by the Canadian dollar. It is explained by the slow recovery in oil prices, which are now traded at $81 per barrel (WTI). Taking the oil component of Canadian exports into account, this fact provides confidence for investors regarding the Canadian currency. However, it is still too early to talk about a steady trend, so if the US figures are confirmed, we would expect the highs of the USDCAD to be updated.

USDCAD currency pair

Here we consider the given currency pair on the H4 chart. The price has formed a triangle, indicating a temporary weakening of the current trend and establishing a steady market state. At the moment we can see the trend line breakout in the direction of the green zone, which is accompanied by the Parabolic reversal. It should be emphasized that the price breakout is not confirmed by the RSI-Bars signal, and that means we would better wait for the resistance breach at 52.8089%, so that we would be confident in the growth continuation. As it is supposed, it will happen after the key price level crossing at 1.12589, which coincides with the Donchian Channel (13) high. This mark can be used for placing a pending buy order with Stop Loss to be placed below 1.11168. The given level is good for conservative trading, as it is strengthened by Parabolic historical values and DonchianChannel lower boundary.

After position opening, Trailing Stop is to be moved after the Parabolic values, near the next fractal low. Updating is enough to be done every day after a new Bill Williams fractal formation (5 candlesticks). Thus, we are changing the probable profit/loss ratio to the breakeven point.
PositionBuy
Buy stopabove 1.12589
Stop lossbelow 1.11168

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