NZD/USD, USD/CAD Face Key Levels as BoC, RBNZ Meet
- Both the BoC (14:00 GMT) and the RBNZ (21:00 GMT) meet today.
- USDCAD's two-month uptrend in question if triangle fails.
- See the September forex seasonality report.
Needless to say, expect a wave of volatility in the FX commodity bloc today. Two central bank meetings from economies largely contingent on positive developments in commodity prices have the spotlight today, with the Bank of Canada and the Reserve Bank of New Zealand due to release their latest policy prognostications.
For the BoC, the meeting comes against the backdrop of a falling Canadian Dollar, thanks to falling energy prices, low inflation, and recent data that showed the Canadian economy slipped into a recession in the first half of the year. With Canada heading to the polls for the federal election in six weeks, any further weakness in growth will have to be countered by the Bank of Canada, through either forward guidance or substantive policy action; in either case, growth-positive stimulus measures seem unlikely to emerge from fiscal authorities in the interim. A more dovish BoC than what's currently being priced in (rates expected on hold) could easily jumpstart the next leg of Canadian Dollar weakness.
For USDCAD, the meeting comes at a crucial time for the pair, with the recent rising channel from the July 14 low coming into question. In context of the move higher the past two months, a shorter-term symmetrical triangle may have formed on the H4 and daily timeframes, suggesting that the next leg is higher. However, with the BoC today, it's best to entertain both long and short options: a move through C$1.3325/30 would trigger a breakout higher; a move below C$1.3115/20 would signal the end of the uptrend.
--- Written by Christopher Vecchio, Currency Strategist
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