Monthly chart – Spot currently trades at 1.2590
1.2461 – May 2016 low
1.2239 – confluence of rising trend line and upward sloping monthly 50-MA
1.2621 – 50% Fibonacci retracement of 1.6185-0.9057
1.2672 – 38.2% Fibonacci retracement of 0.9407-1.4690
Indicators – RSI has turned bearish, MACD shows the bearish momentum is gathering pace
The pair has breached Aug 2016 low of 1.2764, which will not act as a resistance. On the downside, the key levels to watch out for are –
- 1.2672 (38.2% Fibonacci retracement of the rally from July 2011 low to Jan 2016 high)
- 1.26544 (June 2016 low)
- 1.2461 (Apr 2016 low)
The 4-hour chart below shows a solid downside break of the falling channel… the RSI is oversold. A corrective pull back could be seen, but is likely to face stiff resistance at 1.2806 and 1.2859. Its a sell on rise trade, so bears could make a come back anywhere between 1.2860-1.29.
Poloz tried his best at the end to stall the rise in CAD by saying the bank would not predict if the rates could go up further this year. But it is clearly not working…
Poloz sees inflation on target this year… sees higher rates in future. CAD is on fire…38.2% Fib R stands at 1.2672. Also take note of the head and shoulders breakdown.
The hawkish rate hike has yielded a full cent drop. USD/CAD now trades at the lowest level since September 2016. Now we wait for Poloz comments.
The pair is seeking support of the falling channel floor (dotted lines). The daily RSI is oversold, hence watch out for a potential rebound from the channel floor. CAD could witness sell the fact trade… if Poloz remains non-committal about future rate hikes.
Daily chart – The falling channel support is seen around 1.2820. The policy statement say future rate hikes depend on incoming data… press conference could see policymakers talk down future rate hike bets. Watch out for a rebound 1.2820.
The odds of a July BoC rate hike jumped to 90% from 86% after Canadian data showed the economy added 45,300 jobs last month, Statistics Canada said, topping forecasts for a gain of 10,000. The unemployment rate dipped to 6.5 percent, its lowest since April.
The rate hike looks like a done deal… Over the last one month, Canada 10-year yield has jumped from 1.373% to 1.88%. The sharp rally also indicates the rate hike has been priced-in to a large extent, even though at least a small part of the rally was fuelled by the sell-off in the German debt.
Meanwhile, the USD/CAD chart shows the pair is oversold as per the 14-day RSI. Once again, I would want to be a intraday buyer around 1.29 handle for an upside objective of 1.30. My stops would be very tight… just 20 pips.
solid data continues to flow out of Canada. A rate hike looks like a done deal next week. USD/CAD is increasingly looking oversold.
Canadian dollar has been rallying since early May largely on expectations that the Bank of Canada (BoC) would hike rates this year. Some expect the BoC to give a strong hint of a rate hike this month. USD/CAD has dropped from 1.3793 to 1.29 levels over the two month period.
In my opinion, BoC’s hawkish turn has been priced-in at least for the short-term. The daily chart below shows the RSI is oversold. The trade data released today favors USD.
The short-term moving averages – 5DMA and 10-DMA are seriously overstretched. The daily RSI has breached the falling trend line as well…
I expect USD/CAD to revisit 1.30 and then consolidate around the psychological levels… that would help 10-DMA catch up with the sharp drop in the exchange rate.
Trade: Buy around @ 1.2925 Objective 1.30 Stops below 1.2890
Looks like the market strongly believes the Bank of Canada will hike rates within couple of months…