The USD/CAD pair shot straight up during the session on Wednesday, as the Federal Reserve released minutes that suggests that many of the members on the board are now in line with Ben Bernanke as far as tapering off of quantitative easing during the month of September or October is concerned. This is a very positive turn of events for the US dollar, and as a result, the dollar has rocketed higher against most other currencies around the world.

The Canadian dollar on the other hand is tied to oil, which seems to be getting a bit soft at the moment. However, we are still well within the consolidation area that we’ve seen in that market, so it’s a bit difficult to get overly bearish for the Canadian dollar. However, since the Federal Reserve seems to be driving most currency pairs at the moment, this one likely won’t be any different.

WHAT 1.0450 MEANS

The 1.0450 level meant a lot to me, and the fact that we broke above it so drastically indicates that we are at least heading towards the 1.06 handle in the short term, and possibly much higher. That being the case, this market could offer a nice trading opportunity for not only long-term traders, but intermediate term traders as well. Short-term traders can also cash in on this as well, but quite frankly the move should be big enough that hanging onto the trade is paramount as there’s no point in leaving anything on the table.

Going forward, it would seem likely that this pair will at least test the 1.06 handle, but it would not be surprising to see a test the 1.10 handle, especially if the Federal Reserve does in fact taper off of quantitative easing in the next couple of months. After all, this will work against the price of oil, which will also work against the value the Canadian dollar. This is a perfect example of how so many of the markets around the world now are completely interconnected.

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