USD/CAD Daily Signals – December 14, 2017

Dollar turned bearish after FED’s failure to deliver

While the Fed passed a stable policy message, the markets were probably down casted on the Central Bank not dropping a more decisive signal.

The statement comprises of all similar buzzwords such as the labor market continues to “strengthen”, activity is “solid”, and risks are more or less balanced, its inflation is anticipated to track back to 2%, growth will be “moderate” and hikes will be “gradual”.

From the last statement, one of the low-key developments indicates that the Fed believes we are in the environment of full employment. There is not much scope for unemployment to decline the policy encouraging strong labor market conditions rather encouraging some further reinforcing in labor market conditions.

On Wednesday, the economists stated that the one major outcome from the Federal Reserve’s latest meeting that the U.S. central banks remain clueless by the outlook for inflation. The Fed officials decided their GDP estimates and mentioned that the labor market will “remain strong” in their economic forecasts. Due to transitory factors most of the Fed officials consider low inflation this year which could wind up being something that is more established and emerges to be permanent.

Most of the FOMC members have placed on securing labor market conditions as a parent to inflation. The Fed was concerned through the inflation problems in the short run. Fed might turn more worried if the puzzle continues. The market conditions allow the Fed to continue securing the policy politely for the next year.

Intraday bias in the USD/CAD pair remains bearish with the 1.2874 resistances level intact. A deeper decline is expected for the pair as long as resistances hold the area with price. We expect to do the same this time as price has been unable to breach this area. The pair’s price action stays below the resistance level at this point with pair being rejected at this area.  The pair has been fluctuating around this area until now we view this as changing with the original trend. Thus, we’d expect the resistance level and intraday bias to remain bearish. The pair continues with a downside bias with the price action signaling a strong bearish rejection. The pair’s current rejection of the trend line and will oscillator at the 30.0 levels. There is a clear indication of trend reversal shifting the momentum. The current development suggests that the medium term downside is expected a further low. The pair’s focus shall be at the 1.2795 level breaks here and should make lower lows with to the 1.2766 levels. This prefers selling into rallies from current levels and the short-term momentum indicators look heavy on Thursday.


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