The global financial markets made substantial moves in the New York trading session as two of the FOMC members shared their thoughts on unfolding central bank action.

As we know, the FOMC member Brainard was due to speak during the U.S. session yesterday and she remarked that the committee needs to review inflation ahead of considering another interest rate hike. She sounded quite dovish while emphasizing that the FED should take the soft inflation figures into consideration and proceed more cautiously with their subsequent tightening measures.

On the other hand, the FOMC member Kashkari was more concerned about wage growth. He emphasized that inflation is low because of low wages and that he might only stop opposing further rate hikes if wages picked up.

Daily Highlights

Today is likely to be another highly volatile day and we may have multiple trade opportunities on forex pairs. Let's take a look at some of the major fundamentals to watch today.

GBP – Average Earnings Index 3m/y will be released at 8:30 (GMT) with a forecast of 1.8%, below the previous figure of 2.1%. The unemployment rate is expected to remain unchanged at 4.6%.

At the same time, the Office for National Statistics will release the Claimant Count Change, which is expected to increase by 10.5K as compared to the previous figure of 7.3K. The point to remember is that increasing claims are considered to be bad for economic growth and thereby has the potential to weaken the pound.

CAD – At 14:00 (GMT), we may see a storm of volatility in the market as we are expecting multiple economic events from the United States and Canada. The BOC is scheduled to release its overnight lending rate (interest rate) with a forecast of 0.75% which is higher than the previous 0.50%.

Personally, I think that an interest rate hike is largely 'priced in', but if perhaps the Bank of Canada fails to increase the rate, it will result in a heavy selloff in the Loonie. In addition to the rate decision, we also need to monitor the BOC monetary policy report.

USD – Fed Chair Yellen is due to testify on the Semiannual Monetary Policy Report before the House of Financial Services Committee, in Washington DC at 14:00 (GMT).

USD/CAD –  Celebrity Of The Day

I don't want to write much on the commodities currencies but the fundamentals are really compelling and I'm anxiously awaiting them. The Loonie has been consolidating in a narrow range after soaring dramatically against the Buck on Friday. But on Monday, it pulled back slightly as investors took profit.

There is a solid correlation between WTI crude oil and the Loonie as the Canadian economy highly depends on oil exports. Therefore, the fall in oil prices is massively damaging the Canadian economy. Having said that, do you guys think that the Bank of Canada needs to increase their interest rate?

Exactly, that's my point. The Bank of Canada needs to keep its monetary policy accommodative in order to boost the sinking inflation.

Forex Trading Signal Idea

Since the market is likely to stay highly volatile, investors are recommended to watch $1.2935 closely as below this level, the market has the potential to go for $1.2810.

USD/CAD – Daily Chart – Symmetric Triangle Pattern

Technical Outlook – Intraday

On the daily chart, we can see that the USD/CAD has broken the symmetric triangle pattern and at the moment it's trading in the oversold region. The RSI (at 29) and Stochastic (at 24), both suggest that the downtrend may get weaker as investors are likely to take profits.

Perhaps, the BOC may become a reason for this profit taking. Let's take a quick look at the trading levels that are worth watching today.

Support     Resistance

1.2884         1.2943    

1.2855         1.2973    

1.2825         1.3002

In order to make profitable trading decisions and gain a better understanding of how to use trading levels, I would highly recommend looking at FX Leaders' Support and Resistance Levels – Forex Trading Strategy.

New Instruments in Our Forex Signals Service

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