USDCAD is dropping below the 1.3325 trend line I’ve mentioned recently.
Today’s Consumer Price Index (CPI) numbers came in just under forecast, helping support the rally from stocks.
It’s also triggered another down day for the US Dollar Index (DXY).
As for USDCAD, the pair is trading below the 1.3325 November trend line.
But the intraday price action is less significant than the 5 pm EST daily close.
A daily close below this trend line at 1.3325 would signal a breakdown from USDCAD less than 24 hours ahead of Wednesday’s Fed rate decision.
However, you should question any significant break ahead of high-impact news.
We’ve already seen a few other markets disrespect key levels going into CPI, which is why I’ve mentioned that trading this week will be difficult and risky.
The USDCAD either holds above 1.3325 today, gives us a confirmed fakeout later this week, or breaks down.
Here’s what I’m watching if it does break the November trend line:
The June 2021 trend line could come into play for USDCAD on a sustained break below 1.3325 this week.
That trend line comes in near 1.3060 at the end of this month.
But the scenario above will only materialize on a sustained break below the November trend line.
The 1.3325 to 1.3650 range would remain intact if USDCAD closes above 1.3325 today or gives us a confirmed fakeout later this week.
Wednesday’s Producer Price Index (PPI) and Fed rate decision will decide which USDCAD scenario we get this month.
Until then, there isn’t much to do here, as attempting to long or short a pair like USDCAD ahead of PPI and FOMC is ill-advised.
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