Yesterday’s candle for the usd to cad pair, failed to follow through on the previous two days of wide spread down bars, leaving us with a long legged doji, indicating indecision in the market. It is interesting to note that the upper leg bounced off the 14 day moving average which therefore remained intact, indicating that the move is far from over just yet. The main news affecting the usd cad currency pair yesterday, were the record low US confidence figures, followed by BOC Governor Mark Carney’s comments on the Canadian economy, and at the speech in Halifax yesterday, he made a strong statement suggesting that Canada would not suffer a decline in consumer prices, indicating that deflation was a remote possibility, and highlighting the cuts in interest rates as a powerful force in turning the economy around. This is in line with his previous comments where he believes that 2009 will be an extremely tough year for Candians with many losing their jobs, but that 2010 will be the year of recovery with strong growth in the economy.
His statement went on to say : “I want to emphasize that this projected brief period of falling prices does not signal the onset of deflation. One reason for this is that the headline inflation rate, which fell to 1.2% for December, has been dragged down by energy prices” He also said most other prices were not falling, with more than half the goods in the consumer price index basket currently rising at more than the 2% target, the mid-point of the central bank’s 1% to 3% target range. Mr. Carney’s comments follow the central bank’s monetary policy report update on Thursday that forecast total inflation to drop below zero in the second and third quarters this year. He ended his statement by confirming that the focus of attention was on the financial crisis and ensuring that normal credit facilities and interbank lending would be re-established quickly.
The only other piece of news likely to affect the usd to cad currency pair later today is the relase of FOMC minutes and the FED Funds rate decision this evening ( UK time). More about this on the euro to dollar site. My suggested strategy for trading today is much the same as yesterday – attempt small short positions at 1.2210 with a stop loss above 1,3000 ( not at it please!!!)
The short term is bearish, the medium term is sideways, and the long term is bearish.
Hello Anna,
In the light of the correlation between CAD value and oil prices, would you firmly state that this is the reaction of the former on the variation of the latter ?
Being relatively new to the currency market, would you please define short, medium and long term in absolute values.
Thank you.
Correlation between rise in value of the Canadian dollar and oil price occurs for 2 reasons: first Canada is an oil producer and second as the oil price rises the value of the dollar has tended to fall – at least this is what happened last year. However, this correlation is not fixed and will ebb and flow in all time frames.
In my opinion in the currency market (or any other market) it is not possible to ascribe an absolute value to short, medium and long term, however, for the purposes of reading the posts and in my own trading, short term is a few days, medium term is the next few weeks and long term could be several months. All trading is much more of an art than a science and one of the problems many new traders have is a tendency to flick through different time frames, each of which will give a different (and sometimes contradictory) view of the price action and direction. The key is to decide on your trading strategy and then to choose one of two time frames and stick with them. Hope this helps.