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Canadian Dollar Surges post-BoC, USD/CAD Breaks Down: CAD Outlook

Canadian Dollar Surges post-BoC, USD/CAD Breaks Down: CAD Outlook

2019-12-05 13:33:00
James Stanley, Currency Strategist
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Canadian Dollar Talking Points:

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

usdcad usd/cad four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

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

usdcad usd/cad daily price chart

Chart prepared by James Stanley; USDCAD on Tradingview

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

usdcad four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

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

usdcad usd/cad eight hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- 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.

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