USD To CAD - Daily FX Chart 21st April 2009

USD To CAD - Daily FX Chart 21st April 2009

Yesterday’s dramatic wide spread up bar certainly added a new dimension to the term “short squeeze” which was certainly more pronounced than I would have expected closing well above both the 9 and 14 day moving averages.  The combined effect of a dramatic fall in oil prices coupled with a fall in equities and subsequent dollar strength certainly added to the explosive cocktail sending the usd to cad rocketing up.  However, the close of the day finished well below the 40 day moving average and more importantly, deep into a consolidation area which may well provide stubborn resistance to any further sustained move higher.  Nonetheless, this cannot be ruled out completely, as we have a number of significant fundamental news items on the economic calendar pertaining to the Canadian dollar, not least of which is the BOC rates statement and rate decision due up in a couple of hours when the Bank of Canada is expected to keep rates on hold at 0.5%.  As the rate decision is often priced in the market sit tends to be overshadowed by the BOC statement which focuses more on future policy and direction.  Indeed this may be the key to the direction for the usd to cad in the short term as the Bank are considering more aggressive and extraordinary measures designed to revive a shrinking economy.  Some analysts believe that Governor Mark Carney may indeed be forced to cut to 0.25%.  Like many other central banks the BOC too is now being forced to consider more dramatic and unconventional methods such as quantitative easing in an effort to halt the slide in the economy.  These  announcements are followed an hour later by the appearance of Treasury Secretary Geithner before a Congressional Committee in Washington DC.

My trading suggestion for today is to wait for the above events to unfold especially as Geithner has a nasty habit of spooking the equity markets which in turn will affect the currency markets.  The direction for the next few days may well be dictated by today’s candle which is currently developing into a spinning top whilst it awaits the news.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live charts by simply following the links.  I have also included details on an excellent ECN broker.