Canadian Dollar Surges post-BoC, USD/CAD Breaks Down: CAD Outlook
Canadian Dollar Talking Points:
- CAD bulls have come back with a vengeance following yesterday’s BoC rate decision.
- While USD/CAD had previously shrugged-off early-December USD-weakness, USD/CAD bears have been playing catch up over the past 24 hours following that rate decision.
- DailyFX Forecasts are published on a variety of markets such asthe US Dollar or the Euro and are available from the DailyFX Trading Guides page.
CAD Surges, USD/CAD Breaks Down Following BoC
USD/CAD bears have come back with force following yesterday’s Bank of Canada rate decision. While there were no actual adjustments to rates, the BoC sounded somewhat upbeat in remarking that they felt the global economy was stabilizing. This decreased expectations for a near-term rate cut out of the bank in early-2020, bringing buyers back into the Canadian currency as USD/CAD broke through near-term supports on the way to fresh four-week-lows.
USD/CAD Four-Hour Price Chart
This was a focus market in Tuesday’s webinar as USD/CAD had thus far appeared immune to the USD-weakness that showed so visibly around the December open. This was due to the fact that even with a weak US Dollar, the Canadian Dollar was even weaker, driven-lower by those expectations for a possible BoC rate cut in April of next year. But with odds for a near-term cut diminishing, CAD-bears have capitulated and the pair has been playing catch-up over the past 24 hours as USD/CAD-sellers have started to make their mark.
USD/CAD Daily Price Chart
USD/CAD Near-Term Strategy
While the pair was previously a favorable venue for USD-weakness, the build of a recent range in USD/CAD while USD was breaking down elsewhere brought that view into question. However, with the reemergence of CAD-strength following yesterday’s BoC rate decision, that door has re-opened as traders can now investigate short-side scenarios in the pair.
At this point, price action is testing a support zone comprised of a Fibonacci level at 1.3167 up to recent swing-low at 1.3176. This could be a difficult area for establishing fresh short-side exposure, and traders looking to onload bearish positions can look for pullback potential to lower-high resistance. Such an area exists around 1.3208-1.3218 for aggressive strategies which was a prior area of swing support; and a bit-higher is a secondary zone of interest at the psychological level of 1.3250 up to 1.3262.
USD/CAD Four-Hour Price Chart
On the underside of current price action, a number of possible target areas exist, including the 1.3125 September swing-low or the 1.3100 level that helped to set support in late-July. Below that, 1.3065 remains of interest and lastly that brings into play the big figure of 1.3000; which has been an elusive area on the chart for USD/CAD-sellers as this level hasn’t been in-play for over a year despite multiple drives down towards this region.
USD/CAD Eight-Hour Price Chart
To read more:
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.