USD/CAD Faces Key Test As BoC Shift Monetary Policy Outlook

 

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USD/CAD

1.3228

1.3325

1.3222

96

103

The Canadian dollar has staged a meaningful advance as Bank of Canada (BoC) Senior Deputy Governor Carolyn Wilkins warns the central bank will be ‘assessing’ the degree of monetary stimulus as ‘growth continues and, ideally, broadens further,’ and the Governing Council may continue to change its tune over the coming months as ‘the Canadian economy’s adjustment to lower oil prices is largely complete and recent economic data have been encouraging.’

Keep in mind the broader bias for USD/CAD remains constructive as the Federal Open Market Committee (FOMC) appears to be on course to implement three rate-hikes in 2017, and the fresh updates from Chair Janet Yellen and Co. may heighten the appeal of the greenback especially if the central bank unveils a more detailed exit strategy. However, the near-term outlook remains tilted to the downside as the dollar-loonie exchange rate clears the April-low (1.3223), and the pair may continue to give back the advance from earlier this year as it appears to be on its way to threaten the bullish formation carried over from 2016.

USD/CAD Daily

 

Chart – Created Using Trading View

With dollar-loonie quickly approaching channel support, USD/CAD faces a key test, with a break of the long-term bullish structure highlighting a potential shift in market behavior; keeping a close eye on the Relative Strength Index (RSI) as it fails to preserve the upward trend carried over from December and appears to be pushing into oversold territory.

USD/CAD may continue to carve a series of lower highs & lows over the coming days as the bearish momentum appears to be gathering pace, with the pair at risk for further losses as long as it holds below the former-support zone around 1.3280 (50% retracement) to 1.3310 (38.2% retracement).

Next downside region of interest coming in around 1.3150 (78.6% retracement) followed by the Fibonacci overlap around 1.2970 (23.6% expansion) to 1.2990 (23.6% retracement).