USDCAD continues to trend lower and is moving inside a descending channel visible on the 1-hour time frame. Price is currently testing support and could be due for a pullback to the resistance once more.
Stochastic is pulling up from the oversold area to suggest that profit-taking off the 1.2450 area might take place. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, the 100 SMA lines up with the channel resistance to add to its strength as a ceiling.
The FOMC decided to keep interest rates on hold at 1.00-1.25% as expected after hiking in June. They also signaled that balance sheet unwinding could begin “relatively soon” and that they would stick to reinvesting for now.
What drew dollar bears in was the Fed’s new assessment that overall inflation has declined, compared to their previous statement that it “declined recently” and is “somewhat” below 2%. Still, the Fed noted that hiring has been solid and that household spending and business investment continue to expand.
As for the Canadian dollar, it got another strong boost from an uptick in crude oil. The EIA reported a larger than expected draw of 7.2 million barrels versus the projected reduction of 3.3 million barrels. US durable goods orders data is due next and there are no major reports lined up from Canada.
By Kate Curtis from Trader’s Way