Since establishing a two-year low just above the 1.2400 handle in late July, USD/CAD has formed a clear reversal pattern – a V-bottom – characterized by a sharp bullish reversal resembling the letter, “V.” USD/CAD often tends to switch directions with this type of an abrupt reversal pattern, as the beginnings of trend changes in this currency pair can be relatively swift events. Currently, this reversal pattern has pushed USD/CAD up to approach the key 1.2800 level, which is also where the 50-day moving average currently resides.
This week, the short-term trajectory for the currency pair will depend to a large extent on how the markets interpret the Federal Reserve’s latest monetary policy stance when the minutes of the late-July FOMC meeting are released on Wednesday. Any hawkish nuances from the minutes could transform what was considered a relatively dovish meeting at the time into new-found fuel for the battered US dollar.
Also featured this week will be key inflation data from Canada in the form of July’s Consumer Price Index (CPI). Prices are expected to have remained steady after the previous month’s -0.1% drop. Another lower-than-expected CPI reading could weigh further on the Canadian dollar, boosting USD/CAD even more. Also potentially supportive of USD/CAD would be extended pressure on crude oil prices, which could continue to weigh on the energy-correlated Canadian dollar.
As noted, the recent rise of USD/CAD in the past two weeks has brought the currency pair up to approach key resistance around the 1.2800 handle and the 50-day moving average. If a continued rise for the pair amid this week’s critical economic events is able to overcome this resistance, it would confirm the strength of the current bullish reversal, potentially propelling USD/CAD back up to the key 1.3000 psychological level.
Investopedia does not provide individual or customized legal, tax, or investment services. Since each individual’s situation is unique, a qualified professional should be consulted before making financial decisions. Investopedia makes no guarantees as to the accuracy, thoroughness or quality of the information, which is provided on an “AS-IS” and “AS AVAILABLE” basis at User’s sole risk. The information and investment strategies provided by Investopedia are neither comprehensive nor appropriate for every individual. Some of the information is relevant only in Canada or the U.S., and may not be relevant to or compliant with the laws, regulations or other legal requirements of other countries. It is your responsibility to determine whether, how and to what extent your intended use of the information and services will be technically and legally possible in the areas of the world where you intend to use them. You are advised to verify any information before using it for any personal, financial or business purpose. In addition, the opinions and views expressed in any article on Investopedia are solely those of the author(s) of the article and do not reflect the opinions of Investopedia or its management. The website content and services may be modified at any time by us, without advance notice or reason, and Investopedia shall have no obligation to notify you of any corrections or changes to any website content. All content provided by Investopedia, including articles, charts, data, artwork, logos, graphics, photographs, animation, videos, website design and architecture, audio clips and environments (collectively the "Content"), is the property of Investopedia and is protected by national and international copyright laws. Apart from the licensed rights, website users may not reproduce, publish, translate, merge, sell, distribute, modify or create a derivative work of, the Content, or incorporate the Content in any database or other website, in whole or in part. Copyright © 2010 Investopedia US, a division of ValueClick, Inc. All Rights Reserved
Recommended Content
Editors’ Picks
EUR/USD clings to gains near 1.0700, eyes on key US data
EUR/USD clings to gains near the 1.0700 level in early Europe on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold price lacks firm intraday direction, holds steady above $2,300 ahead of US data
Gold price remains confined in a narrow band for the second straight day on Thursday. Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity. Traders now await key US macro data before positioning for the near-term trajectory.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. Coupled with broader market gloom, INJ token’s doomed days may not be over yet.
Meta Platforms Earnings: META sinks 10% on lower Q2 revenue guidance Premium
This must be "opposites" week. While Doppelganger Tesla rode horrible misses on Tuesday to a double-digit rally, Meta Platforms produced impressive beats above Wall Street consensus after the close on Wednesday, only to watch the share price collapse by nearly 10%.