It Could Be A Lively Session For USD/CAD With Powell and BOC On Tap
Matt Simpson July 10, 2019 2:02 AM
With Fed minutes, Powell’s testimony and a BoC meeting, it should make for a lively session for traders, with USD/CAD finding itself caught in the crossfire.
Starting with volatility (lower panel) we can see that 1-week historical volatility has dropped as markets await this key date. However, implied 1-week volatility has also risen to show markets do not expect volatility to remain low. Given there are so many moving parts over the next 12 hours between the Fed and BOC, it would be advisable to step aside until a clearer picture emerges from the occasion. Yet what we’re looking for is a clear diversion between the Fed and BOC, which could allow us to expect a sustained bullish or bearish move.
The daily chart remains in a clear downtrend, and yield differentials (US-CA2 year) also with a bearish trend as prices are closely tracking them. However, prices are retracing from their lows since failing to hold below our initial target around the February 2019 low and we could see this push higher if Powell is less dovish and/or BoC are more hawkish than expected. Regardless, we retain our core bearish view for USD/CAD but it still leaves room for a deeper retracement before heading lower once more.
The four-hour chart shows a potential reversal pattern which could be part of the daily correction. It’s hard to call it a textbook reversal pattern, but price action is reminiscent of either an inverted head and shoulders pattern, or perhaps a double/triple bottom.
- 1.3145 is a pivotal level over the near-term
- A clear break above 1.3145 could signal further upside within the bearish channel
- Counter-trend bulls could target the upper channel and / or the resistance cluster around 1.3225/50 (or bears could look for opportunity to re-enter short if bearish momentum returns around these levels).
- A rejection of 1.3145 is favourable to the bear-camp and signals a return to its bearish, daily trend.
- A break of 1.031 signals further downside on the daily trend in line with our core, bearish view.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.