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.