USD vs CAD - Daily Candle Chart 4th June 2009

As I have been suggesting for some time, and indeed as mentioned in yesterday’s market commentary, the short squeeze duly arrived closing the trading session with a wide spread up bar, which closed marginally above the 9 day moving average and almost 300 pips up on the day – no doubt frightening many short sellers who rushed to cover their positions! The reason for the bounce was twofold – first, after such a steep fall it was inevitable that at some point we would see profit takers entering the market and currency traders in general seeing an opportunity to cash in, and secondly the move was triggered by a return of US dollar strength following a general weakening in equity markets on the back of fundamental news in the US, with the 1.08 price level provide the springboard for the move higher. The question of course is whether this is a temporary short term reversal, or a signal that the bearish trend has run its course, and in order to provide an answer we need to analyse the daily usd to cad chart in a little more detail.

First, it is clear that the 1.08 price point has provided the base, and this will now prove critical if we are to see the move re-established in due course. Secondly, whilst the close of the day finished the session marginally above the 9 day moving average, this is far from convincing, and indeed could be considered as providing a barrier to any further move higher on the day, suggesting in turn that this could simply be a temporary reversal after a long and steep fall. Finally the candle provides a bullish engulfing signal which we need to take notice off, and to pay attention!  My own view is that we need to see this signal confirmed before we can begin to make any trading decisions, and the interest rate decision due from the Bank of Canada shortly, may well provide the answer for today’s price action, with a break back and hold above the 1.13 region and  both the 9 day and the 14 day average suggesting that we could see a longer term rally upwards. Alternatively the candle and signal may simply be ignored, but as always we now need to wait for today’s session to close for any further clues, before entering any new positions or closing existing ones and taking our profits off the table!!

As outlined above the main item of fundamental news on the economic calendar for today is the BOC rate decision and statement, and all the US news is covered for you on the euro to dollar site. You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.