Forex traders are eagerly awaiting today’s FOMC announcement. Expectations call for a 25 basis point interest rate cut by the US Fed to 1.75%, but what will Fed Chief Powell hint in regards to future monetary policy? US President Trump has openly criticized his central bank and even called for negative rates. Inflation has been absent and Trump is seeking assistance in his trade war with China. Despite the more dovish central bank, the US Dollar was able to attract safe haven bids. How will the USDCAD perform after today’s interest rate announcement? Today’s fundamental analysis will explore the downside risk as well as upside potential in this currency pair.
The oil attacks in Saudi Arabia have resulted in a sharp rally in oil prices and has started to benefit the Canadian Dollar which is influence by the price of oil. Today’s CPI data out of Canada is expected to show annualized inflation at the top range of the Bank of Canada’s inflation target. What will this mean for monetary policy out of the Canadian central bank? There remains little room to cut interest rates, will the FOMC cut boost the USDCAD? Subscribe to the PaxForex Daily Fundamental Analysis and join our fast growing community of profitable forex traders!
Here are the key factors to keep in mind today for US Dollar trades:
- US Housing Starts and Building Permits: US Housing Starts for August are predicted to increase by 5.0% monthly to 1,250K starts and Building Permits are predicted to decrease by 1.3% monthly to 1,300K permits. Forex traders can compare this to US Housing Starts for July which decreased by 4.0% monthly to 1,191K starts and to Building Permits which increased by 8.4% monthly to 1,336K permits.
- US FOMC Interest Rate Decision: The US FOMC Interest Rate Decision is predicted to show Upper Bound interest Rates at 2.00% and Lower Bound Interest Rates at 1.75%. Forex traders can compare this to the previous US FOMC Interest Rate Decision which showed Upper Bound interest Rates at 2.25% and Lower Bound Interest Rates at 2.00% The Interest Rate on Excess Reserves is predicted at 1.85%. Forex Traders can compare this to the previous Interest Rate on Excess Reserves which was reported at 2.10%.
Here is the key factor to keep in mind today for Canadian Dollar trades:
- Canadian CPI: The Canadian CPI for August is predicted to decrease by 0.2% monthly and to increase by 2.0% annualized. Forex traders can compare this to the Canadian CPI for July which increased by 0.5% monthly and by 2.0% annualized. The Canadian Core CPI for August is predicted to increase by 2.2% annualized. Forex traders can compare this to the Canadian Core CPI for July which increased by 2.0% annualized. The Core CPI-Median for August is predicted to increase by 2.1% 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 July which increased by 2.1% annualized and to the Core CPI-Trim which increased by 2.1% annualized.
Should price action for the USDCAD remain inside the or breakdown below the 1.3210 to 1.3300 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1.3250
- Take Profit Zone: 1.2915 – 1.3015
- Stop Loss Level: 1.3345
Should price action for the USDCAD breakout above 1.3300 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1.3345
- Take Profit Zone: 1.3430 – 1.3490
- Stop Loss Level: 1.3300
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