The BOC decision is comin’ right up, so I’ve got my eye on this major resistance test on USD/CAD.
Which way might it go next?
Check out the inflection points I’m watching on multiple time frames!
USD/CAD: Daily & 15-min
USD/CAD Daily & 15-min Forex Charts by TV
On the daily time frame (left side) above, you can see that the pair is hanging out at a long-term resistance level that’s been holding since May this year.
This means that it would take a significant amount of dollar strength and Loonie weakness to spur a break above this strong ceiling.
Can the September BOC decision make this happen?
Market watchers are already pricing in the possibility of a tightening pause from the Canadian central bank, and previous instances like this led to a strong selloff for the Loonie back in March and April.
If BOC policymakers remain vague on when interest rate hikes might resume, CAD bears could attack again and trigger a bullish breakout from the 15-min short-term range (right side).
The pair has already formed higher lows, suggesting that buyers are stepping up their efforts to keep USD/CAD supported.
With that, a move past the previous day highs near R1 (1.3680) could confirm that a rally of the same height as the rectangle is in the cards. That’d be roughly 150 pips in size, possibly taking the pair up to R3 (1.3760) or higher.
Technical indicators also seem in favor of more gains, as the 100 SMA is above the 200 SMA to reflect bullish vibes while Stochastic is inching close to the oversold region to signal exhaustion among sellers.
Besides, dollar strength has been the name of the game so far this week, thanks to mostly upbeat U.S. data in the previous week and safe-haven flows stemming from China jitters.
Another strong data point in the form of the ISM services PMI due later today might be enough to trigger another sharp rally for the Greenback, so better keep an eye out for that, too!
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