The USDCAD pair began its bull run during us market hours last night and hit 20 month high during European market hours today. The Bull Run was triggered post dovish comments from BOC’s MPC statement yesterday. While BOC left its policy rate unchanged at 1.75%, the bank adopted a very cautious tone in its statement as it drew attention to the negative impacts of falling oil prices on Canada’s energy sector and the inflation growth in its statement. They noted that economic momentum was slowing into Q4, and perhaps most tellingly stated that there was more room for non-inflationary growth. Additionally, contradicting headlines surrounding an additional OPEC+ oil output cut and tepid price action in crude oil market ahead of OPEC summit made it difficult for Loonie to find bid in market.
BOC leaves policy rate unchanged at 1.75% as expected
This resulted in US Greenback gaining upper hand despite subdued demand in broad market and falling US treasury yield spread which threatened to weaken US Greenback’s broad based strength and momentum in medium to long term outlook. As there was a lack of major impact news and US Greenback saw steady bid action and was further supported by a fresh wave of global risk-aversion trade, triggered by reviving fears of a further escalation in tensions between the US and China. The pair saw its steady upward price action moving well above 1.34 handle and is currently trading at 1.3432 up by 0.57% on the day. On release front, both sides of pair have high impact macro data release scheduled during American market hours. Canadian market will see the release of Ivey PMI data while US markets see the release of ADP Non Farm Payroll data, ISM Non Manufacturing PMI data, Markit Composite PMI & Services PMI data and Crude Oil Inventory data.
When looking from technical perspective, the USD/CAD pair extended its recent upsurge for the three consecutive sessions. Possibilities of some short-term trading had stopped being triggered as the pair managed to sustain its break through the 1.3400 handle steady across European session so far. A follow-through buying has the potential to continue lifting the pair further towards the 1.3480 intermediate resistance en-route the key 1.3500 psychological mark. On the flip side, the 1.3400 handle now seems to protect the immediate downside and is followed by previous strong resistance, now turned support near the 1.3360-50 region.
This article was originally posted on FX Empire
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