The decision to keep US rates on hold and the accompanying statement from the US Fed saw a quick USD sell off, then a sharp reversal. Given the 25% gain the USD made on a trade weighted basis since mid-2014, there is an argument waiting in the wings that a deferred interest rate hiking timetable could see corrective selling of the USD. And the USD/CAD chart agrees.
Interestingly USD/CAD appeared to break the uptrend before the Fed decision. Does this mean the USD would have sold off whatever the decision?
Regardless, it is a trend break. The breaking of any trend does not necessarily signal a new trend in the opposite direction. It could be a false break, it may mean range trading, or possibly it’s a reversal. This is where the Aroon (composite) indicator is useful. Note the sharp drop to below -80%. This may see a strong down trend unfold.
Traders may wait for trading, and a daily close, below the overnight low around 1.3073. Selling at 1.3070, with a stop loss above 1.3200, there are multiple targets on offer, including 1.2810, 1.2570, 1.2360 then 1.1925.