Without a doubt, the biggest economic announcement during the session on Wednesday will be the Bank of Canada interest rate decision. Because of this, the USD/CAD pair will of course be in focus, which of course had a pretty significant move on Tuesday. It was perhaps in anticipation of the interest-rate decision itself, but the USD/CAD pair slammed into the 1.24 level and even cleared the handle slightly. Because of this, we believe that the trading world expects the Canadians to be very dovish, and as a result this pair should continue to go higher given enough time. Look at pullbacks as potential call buying opportunities.
The EUR/USD pair broke down during the session on Tuesday, continuing the move below the 1.10 handle. Because of this, we now believe that puts can be bought and that this market should continue to drive lower, probably heading to the 1.06 level given enough time. With the threat of a rate hike coming out of America, this of course puts more emphasis on owning US dollars going forward. On top of that, the drama in Greece certainly doesn’t help the situation.
Looking at the S&P 500, we fell at the open on Tuesday, but remain above the 2100 level, which is vital support. We believe that there is a significant “zone” of support all the way down to the 2080 handle, so, therefore, we are looking for short-term bounces in order to serve buying calls as the longer-term trend is most certainly still in full effect and very much alive.