USD/CAD Falls Towards Mid-Term Ascending Trendline Post BoC Meeting

The Bank of Canada appeared more hawkish in the last BoC policy meeting raising the GDP growth forecasts, however, policymakers highlighted the risks the domestic economy faces. They left overnight rate at 0.5% as expected and labelled their stance “decidedly neutral”. Following the strong activities of the housing sector at the beginning of the year, the central bank upgraded the GDP growth forecasts for this year to 2.6% from 2.1% projected in January, however, it lowered the economic expansion in 2018, to 1.9% from 2.1% estimated in January. The downgrade of potential growth is attributed to the persistently weak investment.

USD/CAD had an extra push to the downside yesterday after the U.S. President Donald Trump stated that he would prefer Federal Reserve to keep interest rates low as U.S. dollar is getting stronger and that he wouldn’t label China a currency manipulator, depreciating the greenback.

USD/CAD Continues the Sell-Off – Next Target the Uptrend Line
The U.S. dollar dropped more than 1.5% against the Canadian dollar since last Thursday and is moving towards the next support level at 1.3210. Following the pullback on the 1.3450 resistance barrier, the USD/CAD pair started a sell-off and our expectation is to plummet further until the ascending trend line, near 1.3170, that is holding since June 2016.

Moreover, going to the weekly timeframe the 50 and 100 SMAs can provide strong support to the price action. After the test of the latter levels, we are waiting for a continuation of the upward movement. However, if the price manages to plunge below the uptrend line, it will open the door for the 1.3050 handle.

On the daily chart, the price is developing below the three moving averages (50, 100 and 200 SMAs) indicating short positions. The RSI indicator slipped below the 50 level with strong momentum and now is holding in the negative territory. The MACD oscillator entered the bearish area and fell beneath its trigger line.


Analysis by JFD Research