By FXEmpire.com

The USD/CAD pair bounced fairly hard for the session off of the parity level as the Federal Reserve failed to provide any more simulative taught. Essentially, the statement that came out of the Federal Reserve said nothing new. It appears that many in the marketplace figured that some kind of being a new program was about to happen and as such the US dollar got quite a sharp bid after the statement. This was seen across the board, and the Canadian dollar of course was never going to be any different.

The bounce off of the parity level is significant, and we do expect to see a bounce to the 1.0150 level before it’s all said and done. This would still keep within the downtrend channel that we seem lately, and not necessarily threaten the bearishness of this pair. However, the oil markets will have to be watched as the commodity markets on the whole are starting lose a little bit of steam.

With a lot of the headline risks out there right now, it would make sense that the Dollar should continue to get a bid. With the problems in Europe continuing, it makes sense that the “risk off trade” should continue. This of course will work against the commodity currencies in the long run, and this includes the Canadian dollar.

Once we get to the 1.02 level, it is there that we can start to talk about a possible trend change. In till we get to that level, it looks like any bounce will more than likely fail in the end. This down trending channel does look fairly significant, and has been going on since the very end of May. Looking forward, it does strike us that the summer break is just a few weeks away from finishing, and we could see some type of inflection point at that point in time.

Is because of this that we are fairly benign in this marketplace at the moment, but do see potential for a little bit of a short covering rally over the next session or two. We truly believe that barring some type of shock in the Middle East, this market will more than likely be very choppy and directionless until the majority of traders returned from their summer break in early September.

Click here a current USD/CAD Chart.

Originally posted here