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USD/CAD Retreats from Multi-Year High Ahead of FOMC Statement

The USD/CAD has recently broken above the 2007-high at 1.3060. But so far, price has not "cleared" this high, and is retreating under the 1.31 handle. 

USD/CAD 4H Chart 7/28
(click to enlarge)

The 4H chart shows a bit of topping action. However, during such a strong bullish trend, we need much more than a small topping pattern in the 4H chart to consider the pair bearish. At most, we can say that the pair is turning neutral, but still has strong bullish bias. A reason the USD/CAD might be stalling here between 1.29 and 1.31 is that the market might want to wait for tomorrow's FOMC statement before committing either way.

As it stands, the FOMC is much more hawkish than the BoC. While the FOMC plans to raise rates at the end of this year or beginning of 2016, the BoC just recently cut rates, and is far from considering a rate hike. Therefore, unless the FOMC surprises tomorrow by saying that it is no longer looking to raise rates, the USD/CAD should continue to push higher. From a technical perspective, if the USD/CAD starts to make 1.30 a support, we should gain more confidence for the upside risk towards the 1.40 handle, which is the 2004-high. This is a medium-term to long-term outlook going into 2016. In the short-term, if the market has reservation about how hawkish the FOMC truly is, we can see some consolidation at or under the 1.30 psychological handle. In such a scenario, we can anticipate some short-term downside risk towards a previous pivot at 1.2563, but not lower than 1.2350.

USD/CAD Weekly Chart 7/28

(click to enlarge)