Canadian Dollar Technical Forecast: Bullish
- The Bank of Canada is predicted to hike charges subsequent week on the morning of the FOMC charge determination, making for an particularly busy backdrop in USD/CAD.
- USD/CAD put in a bounce this week after a month-long sell-off drove the pair to contemporary lows. But a major zone of resistance lurks overhead, and bulls are going to wish to commerce by means of this zone earlier than topside methods can turn into favorable in USD/CAD once more.
- The evaluation contained in article depends on value motion and chart formations. To be taught extra about value motion or chart patterns, try our DailyFX Education part.
USD/CAD could have lastly discovered some help after the sell-off that began a month in the past despatched costs under various key helps. In late-December, the pair was vying for a 1.3000 take a look at for the primary time within the calendar yr of 2021 earlier than sellers confirmed up at resistance round 1.2950. After a pause within the 2622-2672 help zone, sellers continued to push final week, ultimately producing a contemporary two-month-low within the pair.
Rising oil costs have definitely been a driver. But, Canadian financial coverage has additionally performed a task and this shall be within the highlight subsequent Wednesday because the BoC holds a charge determination on the morning of the FOMC charge determination. This ought to make for an particularly busy Wednesday outlay with charge choices from every consultant Central Bank.
In USD/CAD, this week was marked by some fairly strident protection of help at 1.2450, with an help from the 1.2500 psychological stage. Prices dipped under the large fig final Thursday and regardless of a number of exams over the previous week, sellers have been unable to make any floor under the 1.2450 stage that’s presently functioning because the two-month-low within the pair.
This doesn’t imply that sellers are completed, nevertheless, as a key zone lurks simply above present value motion and it’s the identical zone that was in-play a number of occasions final yr, spanning from Fibonacci ranges at 1.2622 and 1.2672. In the center of that zone is the 38.2% retracement of the current down-trend, and this may add a bit extra perspective to the image, permitting for bearish methods ought to resistance present on this zone.
USD/CAD Four-Hour Price Chart
Chart ready by James Stanley; USDCAD on Tradingview
BoC v/s Fed – First Mover Advantage
There’s a powerful probability of a charge hike out of the BoC subsequent week whereas few, if any count on the same transfer from the FOMC. For that, it appears to be like like we’ll be ready till March. In Canada, inflation equally stays elevated albeit within the current ranges seen within the U.S.. Just final week Canadian inflation printed at 4.8% and that is additional taking part in into charge hike odds out of the BoC.
The drawback right here is one among expectations, and with markets anticipating a hike out of the BoC and no comparable transfer out of the Fed, this may set the stage for a bullish transfer within the USD/CAD pair if the BoC disappoints, as they did in December.
For that – merchants can look to bullish breaks of the 2672 stage, which presently marks the highest aspect of the resistance zone checked out above and that value is confluent with the bearish trendline taken from December and January swing highs.
USD/CAD Daily Price Chart
Chart ready by James Stanley; USDCAD on Tradingview
The forecast for subsequent week shall be set to bullish for the Canadian Dollar. However, given the extraordinary focus that’ll seemingly be paid to each the US and Canadian Dollar round Wednesday’s charge choices, merchants could wish to level that CAD-focus elsewhere.
One market of observe that could be accommodative for that theme is CAD/JPY, which is nearing a serious spot of help across the 90 psychological stage. The pair broke out of a falling wedge to start out the yr and after a powerful run within the first couple weeks of 2022 commerce, CAD/JPY has pulled again and there stays help potential round prior resistance. I’m marking the zone from 90 as much as the Fibonacci stage at 90.25, and this would want to see a help take a look at confirmed by a four-hour or each day candle shut at that spot to maintain the door open on the lengthy aspect.
CAD/JPY Daily Price Chart
Chart ready by James Stanley; CADJPY on Tradingview
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and comply with James on Twitter: @JStanleyFX
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