USD/CAD Gains on Fed's Inflation Fight, Watching for Short Setup
Updated
The USD/CAD pair is edging higher on Wednesday, currently trading around the 1.3687 mark. This upward movement comes as the US Dollar (USD) strengthens, bolstered by commentary from several Federal Reserve (Fed) officials. Their statements collectively suggest that the US central bank remains reluctant to cut its main interest rate, the Fed Funds rate, due to insufficient progress in lowering inflation.
This stance is viewed positively for the US Dollar and, by extension, the USD/CAD pair because maintaining a high Fed Funds rate attracts greater foreign capital inflows from investors seeking higher returns.
However, we also observe a confluence of signs that suggest a potential new bearish impulse for USD/CAD. Yesterday, we successfully closed a short position in USD/CAD with a quick profit, following the release of the Canadian CPI economic data. Today, we are considering another opportunity to sell at relatively premium prices. Specifically, we are targeting the 78.6% Fibonacci retracement level, which aligns with the 38.2% retracement from the major higher swing. Additionally, we have identified a divergence on the H1 timeframe within a possible bearish channel, reinforcing our bearish outlook.
Given these factors, we are looking to establish a new short position in USD/CAD, aiming to capitalize on the anticipated downward movement.
This stance is viewed positively for the US Dollar and, by extension, the USD/CAD pair because maintaining a high Fed Funds rate attracts greater foreign capital inflows from investors seeking higher returns.
However, we also observe a confluence of signs that suggest a potential new bearish impulse for USD/CAD. Yesterday, we successfully closed a short position in USD/CAD with a quick profit, following the release of the Canadian CPI economic data. Today, we are considering another opportunity to sell at relatively premium prices. Specifically, we are targeting the 78.6% Fibonacci retracement level, which aligns with the 38.2% retracement from the major higher swing. Additionally, we have identified a divergence on the H1 timeframe within a possible bearish channel, reinforcing our bearish outlook.
Given these factors, we are looking to establish a new short position in USD/CAD, aiming to capitalize on the anticipated downward movement.
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