Forex Technical Analysis USDCAD : 21 November 2014

Core price index and Canadian dollar

Today at 14:30 (CET) we expect the release of Core CPI which reflects the inflation trend of the Canadian economy. The index is published by the Statistics Canada and measures a change in the price of goods and services, excluding the 8 most volatile items. This indicator determines the inflation rate, which in turn affects the monetary policy and the interest rate established by the Bank of Canada. The Bank’s Governing Council takes the inflation expectations into account to limit the excessive pace of its growth due to the policy tightening. The rate hike leads to investment funds inflow in the country’s economy: this is the reason why CPI release may have a significant impact on the Canadian currency rate against its most liquid competitors.

Let’s consider the USD/CAD currency pair on the H4 chart. The price is moving in the daily bullish trend. We assume that the current retracement is about to be completed. One of the graphic signals of bearish strength is the pattern called “double bottom” (marked in red on the chart). It allows choosing the critical level for placing Stop Loss at 1.12587. Moreover, this level is confirmed by Parabolic historical values and the lower boundary of Donchian Channel. We should wait for the H4 trendline breakout to get the signal confirmation for opening a buy order. This breakout is supposed to coincide with the fractal level breach at 1.13718 and Parabolic upward reversal. The significance of this mark is also verified by the upper boundary of Donchian Channel. Conservative traders should wait for the resistance crossing of the RSI-Bars oscillator at 61.0597% to confirm the buy position opening.

After position opening, Stop Loss is to be moved after the Parabolic values, near the next fractal low. Updating is enough to be done every day after a new Bill Williams fractal formation (5 candlesticks). Thus, we are changing the probable profit/loss ratio to the breakeven point.