USD/CAD Prices Vulnerable as Key Support is Breached
TALKING POINTS – USD/CAD, BANK OF CANADA, CPI, GDP, FOMC, CRUDE OIL
- USD/CAD rallies on dovish BoC but prices may turn lower
- Break in trend line support could point to Loonie strength
- FOMC decision, CPI, and Canadian GDP in focus next
The US Dollar has recently gained against the Loonie, reversing losses sustained for part of this year. However, whether upside momentum continues or the currency pair experiences a bearish reversal is to be seen. Here’s what some of the DailyFX analysts think:
TYLER YELL, FOREX TRADING INSTRUCTOR
USD/CAD’s testing of new highs and the spread between US Treasury and Canadian Treasury 2-year yields nearing its widest in a year could signal near-term bullish momentum, according to Forex Trading Instructor Tyler Yell. Furthermore, weakening Canadian terms of trade and a decline in Western Select Crude oil prices, combined with dovish Bank of Canada comments, could also point towards a rally. A bullish USD/CAD trade structure would place an entry at 1.3356 and a stop at 1.3268, with targets 1 and 2 at 1.3598 and 1.3821, respectively.
USD/CAD Chart (Daily)
PAUL ROBINSON, MARKET ANALYST
On the other hand, the currency pair could extend downside momentum after it broke through critical support, according to Market Analyst Paul Robinson. Following the rejection of a June high and several tests of the ascending October trend line, near-term rallies may lack follow-through. Key support levels to eye are approximately 1.3127, 1.3050, and 1.3000.
USD/CAD Chart (4-hour)
Looking ahead, USD/CAD faces a flurry of medium and high importance data over the next few weeks. The US Dollar could gain on the upcoming FOMC rate decision and release of November’s CPI data. Meanwhile, the Loonie could experience volatility on October’s growth figures and consumer inflation data from last month. The currency pair will also closely eye crude oil inventories, with the release of US Department of Energy figures set for next week.
USD/CAD TRADING RESOURCES
- Join a free Q&A webinar and have your trading questions answered
- Just getting started? See our beginners’ guide for FX traders
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See how the Canadian Dollar is viewed by the trading community at the DailyFX Sentiment Page
--- Written by Megha Torpunuri, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.