We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • How can traders avoid #FOMO in trading? Start by implementing a well-heeled plan taking only four hours per week. Get your insight from @JStanleyFX here: https://t.co/vwUShQPc27 https://t.co/DoVBd1l1oO
  • #Silver is a precious metal commodity that investors use as an inflation hedge and safe-haven asset. Find out what are some strategies and tips to trade silver here: https://t.co/k4tVcFuwxW #CommoditieswithDailyFX https://t.co/zXCSmH2HLX
  • Markets are trying to maintain a bullish tilt as a new week rolls around, a look ahead at the charts of the #Dow, #DAX, and #FTSE. Get your technical analysis on major world indices from @PaulRobinsonFX here: https://t.co/bYjRDvQsdM https://t.co/mbg0rUbv3K
  • Trade conflict is clearly awful for the broad world economy, but some countries are already benefiting from it. More stand to do so. Spotting them early could be profitable. Get your update on the #tradewar from @DavidCottleFX here: https://t.co/og0VAPAqwm https://t.co/xB8hYUj4OA
  • #Gold prices may suffer if better-than-expected US economic data and progress on US-China trade negotiations cool 2020 Fed rate cuts and alleviate demand for anti-fiat hedges. Get your $XAUUSD market update from @ZabelinDimitri here: https://t.co/3ula2sUpqL $gld https://t.co/2iZwxcm3wP
  • What's the difference between leading and lagging indicators? Find out from @RichardSnowFX here:https://t.co/vGx8HCagF5 https://t.co/KCZ48rDnhy
  • Why financial market traders must monitor both monetary and fiscal policy? Find out from @MartinSEssex here: https://t.co/Fkzk88Y5gm https://t.co/tTXcw1b7Tp
  • RT @dlacalle_IA: ... “Temporary” Fed plans to double repo market intervention to avoid cash crunch https://t.co/j6N3Qmo6HX
  • RT @HeathaT: The @USTradeRep "fact sheet" on the US-China deal is pretty light on details, but if you're looking for something written down…
  • The inside bar pattern occurs regularly within the financial markets. Incorporating the inside bar strategy within a trading system can enhance a trader’s market analysis technique. Find out how you can use it from @WVenketas here: https://t.co/E3EWOYTYNw https://t.co/1H5UASpHb7
USD/CAD Rate Depreciation Stalls Ahead of BoC and Fed Rate Decisions

USD/CAD Rate Depreciation Stalls Ahead of BoC and Fed Rate Decisions

2019-10-28 05:00:00
David Song, Currency Strategist
Share:

Canadian Dollar Talking Points

The recent decline in USD/CAD appears to have stalled ahead of the Bank of Canada (BoC) interest rate decision, but the Canadian Dollar may continue to outperform its US counterpart as the Federal Reserve is widely expected to reduce the benchmark interest rate by another 25bp in October.

USD/CAD Rate Depreciation Stalls Ahead of BoC and Fed Rate Decisions

USD/CAD trades near the monthly-low (1.3053) as the BoC appears to be on track to retain the current policy throughout the remainder of the year, while the Federal Open Market Committee (FOMC) comes under increased pressure to insulate the US economy.

Image of BoC interest rate

The BoC may continue to endorse a wait-and-see approach for monetary policy after keeping the benchmark interest rate at 1.75% as “Canada’s economy is operating close to potential and inflation is on target.”

Governor Stephen Poloz and Co. appear to be in no rush to alter the forward guidance as “the current degree of monetary policy stimulus remains appropriate,” but the Federal Open Market Committee (FOMC) may continue to respond to the shift in US trade policy as the International Monetary Fund (IMF)cuts its growth forecast for the world economy.

Image of Fed Fund futures

In fact, Fed Fund futures continue to reflect a greater than 90% probability for another 25bp reduction on October 30, and Chairman Jerome Powell and Co. may continue to endorse a dovish forward guidance as US President Donald Trump tweets that the “Fed was way too fast to raise, and way too slow to cut.”

However, it remains to be seen if Fed officials will project a lower trajectory for the benchmark interest rate as a few participants judged “that it might become necessary for the Committee to seek a better alignment of market expectations regarding the policy rate path with policymakers' own expectations for that path.”

The growing dissent within the FOMC may limit the central bank’s scope to implement lower interest rates, and the committee may show a greater willingness to conclude its rate easing cycle as Fed officials see the benchmark interest rate around 1.50% to 1.75% through 2020.

With that said, a material change in the Fed’s forward guidance may heighten the appeal of the US Dollar, but more of the same from the FOMC may keep USD/CAD under pressure amid the deviating paths for monetary policy.

In turn, USD/CAD may continue to give back the advance from the 2019-low (1.3016), with the exchange rate at risk of exhibiting a more bearish behavior if the FOMC shows a greater willingness to further embark on its rate easing cycle.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

USD/CAD Rate Daily Chart

Image of USD/CAD daily chart

Source: Trading View

  • Keep in mind, the broader outlook for USD/CAD is no longer constructive as it clears the February-low (1.3068), with the break of trendline support fostering a bearish outlook for the exchange rate.
  • Moreover, the rebound from the 2019-low (1.3016) has failed to generate a test of the Fibonacci overlap around 1.3410 (38.2% expansion) to 1.3420 (78.6% retracement), with recent price action bringing the downside targets back on the radar as USD/CAD takes out the September-low (1.3134).
  • At the same time, the Relative Strength Index (RSI) offers bearish signal as the oscillator snaps the bullish formation from July and approaches oversold territory.
  • However, the recent decline in the RSI has failed to trigger an oversold reading, with the lack of momentum to push below 30 raising the risk for a short-term rebound in USD/CAD.
  • Nevertheless, the break/close below the Fibonacci overlap around 1.3120 (61.8% retracement) to 1.3130 (61.8% retracement) keeps the 1.3030 (50% expansion) region on the radar, with the next area of interest coming in around 1.2970 (78.6% retracement) to 1.2980 (61.8% retracement).
  • Will keep a close eye on the RSI as a break below 30 would indicate that the bearish momentum is gathering pace.

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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

DISCLOSURES

News & Analysis at your fingertips.