A relatively quiet trading day as far as fundamental data is concerned, forex traders will eagerly await minutes from the last FOMC meeting where the US central bank cut interest rates by 25 basis points. The US Dollar remained at elevated levels and with markets pricing in more interest rate cut, can the current strength continue or should forex traders prepare for a sell-off? Existing home sales out of the US could also move price action as the housing market, a prime source for the consumer wealth effect which drives spending, has been overall weak. What does this mean for the USDCAD? Today’s fundamental analysis will cover the upside potential as well as downside risk of this currency pair.
Will the Bank of Canada join the chorus of central banks which cut interest rates? Canada’s economy is heavily dependent on commodity exports, but has so far benefited from the rally in precious metals which offset the drop in oil prices. Inflationary pressures remain well anchored and today’s CPI report is anticipated to show a small increase for July, partially reversing June’s surprise deflationary reading. Can the Canadian Dollar rally or will forex traders push for a breakout in the USDCAD? Subscribe to the PaxForex Daily Fundamental Analysis and take the profitable side of this trade!
Here are the key factors to keep in mind today for US Dollar trades:
- US Existing Home Sales: US Existing Home Sales for July are predicted to increase by 2.5% monthly to 5.40M. Forex traders can compare this to US Existing Home Sales for June which decreased by 1.7% monthly to 5.27M.
- FOMC Minutes: The US Federal Reserve will release minutes from its last meeting today and forex traders will look for any potential change in the wording used which could give insight to future monetary policy adjustments. After the central bank delivered one 25 basis point interest rate cut, markets have priced in more and today’s minutes could give clarity on how the FOMC may act during it’s next meeting where another 25 basis point interest rate cut is priced in.
Here is the key factor to keep in mind today for Canadian Dollar trades:
- Canadian CPI: The Canadian CPI for July is predicted to increase by 0.2% monthly and by 1.7% annualized. Forex traders can compare this to the Canadian CPI for June which decreased by 0.2% monthly and which increased by 2.0% annualized. The Canadian Core CPI for July is predicted to increase by 1.8% annualized. Forex traders can compare this to the Canadian Core CPI for June which increased by 1.8% annualized. The Core CPI-Median for July is predicted to increase by 2.0% annualized and the Core CPI-Trim is predicted to increase by 2.1% annualized. Forex traders can compare this to the Core CPI-Median for June which increased by 2.1% annualized and to the Core CPI-Trim which increased by 2.2% annualized.
Should price action for the USDCAD remain inside the or breakdown below the 1.3280 to 1.3345 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1.3300
- Take Profit Zone: 1.3015 – 1.3090
- Stop Loss Level: 1.3355
Should price action for the USDCAD breakout above 1.3345 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1.3380
- Take Profit Zone: 1.3430 – 1.3500
- Stop Loss Level: 1.3345
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