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USD/CAD at Risk for Further Losses on Wait-and-See BoC

USD/CAD at Risk for Further Losses on Wait-and-See BoC

Michael Boutros, Strategist

Talking Points

  • USD/CAD risks further losses heading into BoC
  • Broader focus remains lower sub-1.3254
  • Updated targets & invalidation levels

USD/CAD 240min

USDCAD Daily Chart

Chart Created Using TradingView

Technical Outlook: Heading into the Bank of Canada (BoC) interest rate decision tomorrow the Loonie looks poised for further gains with the USDCAD holding within the confines of a descending pitchfork formation extending off the September & October highs. Note that we’ve been marking strong bearish divergence in daily momentum for some time now with the exchange rate posting an outside-day reversal off the monthly highs last week. An objective break below the monthly open yesterday shifts the focus lower with the median-line extending off the 9/14 high catching the decline earlier today.

The BoC is expected to retain its current policy in October as the central bank leans on fiscal authorities to boost economic activity. From a trading standpoint, heading into the release we’ll favor selling rallies while below immediate resistance at 1.3140/48 with our broader bearish invalidation level up at 1.3254. A break lower eyes subsequent support targets at 1.3025/29, 1.2987 & the highlighted median-line confluence at ~1.2950. For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.

USDCAD SSI
  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net longUSDCAD- the ratio stands at +1.15 (53% of traders are long)- weak bearish reading
  • Long positions are 37.6% above levels seen last week while short positions are 16.87% lower over the same time period.
  • Open interest is 4.9% below its monthly average
  • The retail crowd shifted to net long on October 14th as the pair was in the midst of posting an outside-day reversal off the monthly highs. Current positioning suggests the near-term risk remains weighted to the downside.

Help fine-tune you entries, click here to learn more about the DailyFX Grid Sight Index (GSI)

Relevant Data Releases This Week

USDCAD Economic Docket

Other Setups in Play:

Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016

---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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