The USD/CAD pair traded saw two-way price action yesterday owing to headlines influenced momentum. Despite recovering a significant part of early decline the pair closed on dovish note yesterday. The pair opened positive for the day but saw sharp declines across Asian and European market hours owing to the positive crude oil price in the broad market which rose to new 2019 highs yesterday. However, in the North American market hours, the pair saw a sharp upside move as news hit the market which renewed tensions surrounding Sino-U.S. trade talks.
FOMC Forward Guidance To Provide Directional Bias
The report was published based on comments from US officials who stated that China has begun to back away from its pledges on key issues relating to Sino-U.S. trade talks despite US President Donald Trump hinting at positive progress. The Crude oil price fell in the broad market as renewed tensions combined with concerns of a slowdown in Chinese economic activity weighed down crude oil bulls. China being the biggest importer of Crude oil, a prolonged trade war between US & China would lead to reduced oil imports in China resulting in crude oil taking a dovish turn. Canadian Loonie suffers owing to dovish crude oil price helping US Dollar recover positive momentum despite its the weakness in the broad market.
This caused the pair to erase previous sessions loss and trade rangebound near mid-1.33 handle across Asian and majority of European market hours as USD bulls lacked the strength to build momentum ahead of today’s FOMC update. As of writing this article, the USD/CAD pair is trading flat at 1.3233 up by 0.02% on the day. Investors now await US macro data for directional cues which is likely to influence price action for the rest of the week. On the release front, Canadian macro calendar is silent for the day. However, the US calendar will see the release of EIA weekly crude oil stockpile data, US Fed interest rate decision and Fed press conference. Investors expect US Fed to provide a highly dovish forward guidance with some even suggesting possibility of rate cut plans in the year ahead. A dovish Fed update will lead to pair declining once again while a neutral/hawkish Fed update will lead to pair making a bullish breakout building up a new rally from today’s positive price action.
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This article was originally posted on FX Empire
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