Since forming a bullish pin bar on June 18, the USD/CAD price climbed up around 900 pips over the last six weeks. However, as the pair was rejected around the resistance zone near 1.3100 last week, it formed another bearish pin bar and the price started retracing.
Earlier this week, on Tuesday, the USD/CAD price finally penetrated and closed below the steady looking uptrend line, signaling additional bearish movement.
For the last several months, binary options traders were anticipating that the Federal Reserve will hike its key overnight rate amid a well performing labor market in the United States. However, yesterday, the US Federal Reserve released its Federal Open Market Committee (FOMC) statement, which expressed concerns regarding the inflation situation in the economy and forecasted a rate hike in the third quarter of2015.
“The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey‑based measures of longer-term inflation expectations have remained stable,” said the official statement.
As a result, the US Dollar turned further bullish and the USD/CAD price formed yet another bullish pin bar.
If the USD/CAD price penetrates above yesterday’s high, it would effectively end the retracement and resume the uptrend. Also, given that the USD/CAD has remained in an uptrend for almost two months, the break of the trend line may turn out to be a false breakout.
Hence, it is recommended that trader place a CALL order for the USD/JPY with their binary options brokers once the price penetrates above yesterday’s high, which is at 1.2967.
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