We are being squeezed between the 50-Day EMA and the 200-Day EMA indicators, so that can quite often because a bit of noisy behavior as well.
The USD/CAD has drifted a little bit lower during the trading session on Friday, as the Canadian dollar continues to show strength. At this point, it looks as if the market is trying to do everything it can to reach the 200-Day EMA, which of course is a significantly impressive technical indicator that a lot of people will pay close attention to. At this point, the market looks as if it’s going to at least try that area, and if it breaks down below there it would break support from the previous low near the 1.3250 level. In that scenario, we could go down to the 1.30 level given enough time.
This will be especially true if the oil market suddenly takes off, or if Jerome Powell is somewhat dovish during the speech on Wednesday. Ultimately, this is a scenario where you need to be very careful, but once we break below the 200-Day EMA, you probably have the making of some type of significant selling pressure.
Look for Clarity for the Next Couple of Days
The alternate scenario is that the FOMC statement is enough to get people to believe that the Federal Reserve is going to stay tight for longer, and therefore send the US dollar higher. This could also be the case if oil starts the belt down, which is possible if he spooks the markets as far as strength is concerned. I expect a lot of noisy behavior over the next couple of days so you will have to be very cautious about what you do, but I do think more of a sideways with a slight tilt lower type of market is what we are looking at between now and the FOMC statement. If we were to turn around and break above the 1.35 level, that would be a very bullish sign and could negate this run lower.
We are being squeezed between the 50-Day EMA and the 200-Day EMA indicators, so that can quite often because a bit of noisy behavior as well. Because of this, I would look for some type of impulsive daily candlestick to follow to get aggressive in any sense whatsoever. This pair does tend to be very choppy as there is so much cross-border commerce anyway, so clarity is the one thing that you will be looking for in the next couple of days.