Following the Fed’s decisions on Wednesday to tighten monetary policy faster and the strongly hawkish statements by FOMC members last Friday, the US dollar gained strongly against other global currencies. The Canadian dollar, like other currencies, also lost to its US neighbour.

  • FED turns tap on dollars
  • US dollar gains against most world currencies
  • possible correction on USD/CAD

Canadian dollar close to a correction

The currency pair USD/CAD has been moving in a strong upward trend since mid-October.
Downward corrections are usually small, rarely exceeding 100p. The largest correction that occurred was 240p and ended with a bullish engulfing and a return to strong growths.

USDCAD H4 – inside bar at the top and downward divergence suggests a correction

Earlier this week an inside bar formation formed on the H4 chart, this morning the price broke out of the formation downwards. A maximum appeared on the MACD oscillator and the indicator entered a downward phase creating a bearish divergence with the previous maximum.

This may be a sign of the beginning of another downward correction. Given the strong uptrend, the correction may be limited to the nearest demand zone starting at 1.2880.
An upward breakout from the inside bar formation will negate the downward scenario and the pair will return to the upward trend.

The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE .
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