USDCAD dips back below the 100 hour MA after CPI but rebounds

The  USDCAD  USD/CAD The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh most traded currency. The United States and Canada are geographical neighbors, and as a result there is a lot of trade between the two countries. Thus, there is often decent volatility and low spreads for the USD/CAD, typically between 1 and 3 pips on most foreign exchange brokers. Factors Influencing the USD/CADThere are a number of important economic or news releases that can affect the USD/CAD. This includes among others, Non-Farm Payroll data for the US that are released on the first Friday of each month. Such metrics tell us whether employment is rising or falling, while the Gross Domestic Product (GDP) for Canada or the US, measure the total value of all goods and services produced by the country. In addition, the USD/CAD is known as a “Commodity Pair”, as Canada possesses large amounts of natural resources, specifically oil, which is its most traded commodity. As a result, it’s important for long term speculators of USD/CAD to keep a close eye on crude oil developments due to the strong negative correlation. The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh most traded currency. The United States and Canada are geographical neighbors, and as a result there is a lot of trade between the two countries. Thus, there is often decent volatility and low spreads for the USD/CAD, typically between 1 and 3 pips on most foreign exchange brokers. Factors Influencing the USD/CADThere are a number of important economic or news releases that can affect the USD/CAD. This includes among others, Non-Farm Payroll data for the US that are released on the first Friday of each month. Such metrics tell us whether employment is rising or falling, while the Gross Domestic Product (GDP) for Canada or the US, measure the total value of all goods and services produced by the country. In addition, the USD/CAD is known as a “Commodity Pair”, as Canada possesses large amounts of natural resources, specifically oil, which is its most traded commodity. As a result, it’s important for long term speculators of USD/CAD to keep a close eye on crude oil developments due to the strong negative correlation. Read this Term has dipped modestly on the higher CPI  inflation  Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market. Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market. Read this Term and in the process took a peek below the 100 hour MA at 1.29683. The low price reached 1.2963, but has already moved back toward the pre-release level of 1.2978.

Earlier today in the early Asian session, the price dipped to a low of 1.2910 which got within about 11 pips of the rising 200 hour moving average at the time. Buyers push the price higher and back above the 100 hour moving average. Recall from yesterday also in the Asian session the price dipped below the 100 hour moving average, and stayed below that level for the rest of the trading day (see blue line).

Now the pattern is reversed with the 100 hour moving average seemingly as a support buying area. Although the price moved below off the data, the buyers quickly returned.

What next?

The high price from last Wednesday reached 1.29951. The high price today reached 1.29957 just above that level before rotating back to the downside. Getting back above that level – and staying above – would be needed to increase the bullish bias. Trade more comfortably higher would have traders looking toward the 1.30368 – 1.30515 area (see red numbered circles and yellow area). The high price from last week nearly match the high price going back to May at 1.30782. The double top remains in obvious upside resistance area that would need to be broken as well.

On the downside, a move back below the 100 hour moving average at 1.29683 (and staying below) is needed to tilt the bias back to the downside. Below that level, and the rising 200 hour moving average green line in the chart above) comes in at 1.29213. Again that level was sniffed early in the Asian session, but found dip buyers willing to lean, with stops likely on a break below.