The USD/CAD pair fell during the session after initially trying to break above the 1.0250 level on Tuesday. However, you can see that the pullback was significant enough to cause a shooting star that presently sits above the 1.02 handle. This area has been resistance previously, so there is a possibility that he could be support now. However, the shape of the candle does suggest that we are going to reenter the previous consolidation area between the 1.01 handle, and the 1.02 level.
The Bank of Canada has a monetary policy meeting today, and this will certainly move the market. With that being the case, it is a bit difficult to predict where the market will go, because obviously there can be a bit of a headline shock. Looking at this chart, it does suggest that we are going to fall, but we have to wait and see what the BOC says before attempting to trade this market.
If we do manage to break the top of the shooting star high from the Tuesday session, this would be a signal that the market is going to go much higher. All things being equal, that was our original thought process after seeing the Monday action, but we did see a bit of firmness in the oil markets, as well is the Canadian dollar. Because of that, we believe that this market is essentially waiting around to see what the central bank says.
One of the most interesting things about this statement will be what it means for the United States. After all, Canada sends 85% of its exports down to the Americans, and if they are finding that exports a slowdown drastically, that just says that the Americans are buying. So this will have an effect on the Outlook of the US economy as well, and as a result the statement after the meeting will be parsed and reread several times in order to garner some type of information about the United States. With that being said, if we managed to break below the 1.02 handle on a four-hour close, we are sellers. If we managed to break above the 1.0250 area on a four-hour chart, we are buyers.
Written by FX Empire