USD to CAD - Daily Forex Chart 22nd April 2009

USD to CAD - Daily Forex Chart 22nd April 2009

Yesterday’s candle on the usd to cad pair provides us with several interesting points for analysis, following the rate decision by the Bank of Canada to cut to 0.25%.  On the day the pair closed lower but with a deep upper shadow suggestive of a shooting star candle and with the high of the day just failing to break the 40 day moving average before falling back to close below the 1.2400 region.   Definitely a day where the bears took control in the afternoon and evening sessions forcing the price lower.  What is also interesting is that this has now created a series of lower highs as indicated on the chart by the blue line, and this could well indicate a longer term trend of lower highs and lower lows, characteristic of a bearish trend.  With the candle of yesterday indicating weakness following the squeeze higher of the last 2 days, I would expect prices to fall from this level in due course, but this will only be confirmed once the price action has moved back below the immediate support area at 1.22 and in addition back through both the 9 and 14 day moving averages.  Should this occur then we should see a move to retest the lows at the 1.2 region with the longer term outlook being a move lower to 1.18 in due course.

My trading suggestion for today is to look to enter the market with short positions on any up moves in the hourly chart.  Fundamental news items on the economic calendar which could impact the usd to cad include the crude oil inventory figures later today where market analysts are expecting a further increase to the ever increasing stockpile and we may see some volatility come into the market at this point, in particular the equity market where investors are currently flip flopping between stocks and safe havens, such as gold.  The only item of news for Canada is the Leading Index released by Statistics Canada which provides a composite reading of the economy based on 10 economic indicators – not a particularly reliable guide and one which has little influence on the markets.  The forecast number is -0.7% against a previous of -1.1% and if the actual is better than forecast then this could be positive for the Canadian Dollar.

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