USD/CAD Nears Key Resistance Ahead of Canadian Rate Decision
USD/CAD is hovering just below a key resistance zone, setting the stage for potential high volatility as the Bank of Canada prepares for its next rate decision. Let’s break down what this could mean for the pair, from both a fundamental and technical perspective.
BoC Expected to Slash Rates as Inflation Continues to Cool
On Wednesday, the Bank of Canada (BoC) is widely expected to slash its key policy rate by 50 basis points, marking the fourth consecutive rate cut this year. This move would bring the benchmark rate down to 3.75%, its lowest level in over 15 years outside the pandemic, as the central bank attempts to spur economic growth amidst slowing inflation and weak consumer spending. As Canadian inflation continues to cool—hitting just 1.6% in September—economic indicators like stagnant GDP growth and a faltering housing market have added urgency to the central bank's decision-making process. The rate cut, if realised, could trigger a strong reaction in USD/CAD, given its proximity to long-term resistance and the likelihood of volatility leading up to the decision.
Multi-Timeframe Analysis
Let’s take a trip through the timeframes, starting with the weekly candle chart. On this higher timeframe, USD/CAD has moved into a key area of long-term resistance, where a cluster of five major swing highs since October 2022 has formed a formidable resistance zone. What makes this level even more significant is that USD/CAD has carved out two higher swing lows over the last year, creating a broad ascending triangle pattern. This classic bullish setup signals that a breakout higher could be on the horizon, especially with the rate decision serving as a potential catalyst.
USD/CAD Weekly Candle Chart
Past performance is not a reliable indicator of future results
Moving down to the daily timeframe, the price action shows USD/CAD reacting to the resistance zone, but the reaction has been cautious. We're starting to see negative divergence on the RSI from overbought territory, suggesting that momentum is weakening. However, despite this divergence, the pair hasn’t shown a sharp pullback, which indicates that the bulls still have a foothold. The upcoming rate decision could either fuel a breakout above the resistance or lead to a deeper retracement if market sentiment shifts.
USD/CAD Daily Candle Chart
Past performance is not a reliable indicator of future results
Zooming in on the hourly chart, we get an even more detailed view. The market’s response to the resistance zone has been a low-volatility pullback, lacking the aggressive selling one might expect at such a key level. This suggests that USD/CAD could still make another push higher, testing deeper into the resistance zone before Wednesday’s decision. With volatility likely to ramp up as the rate announcement nears, all eyes are on how the pair handles this crucial level.
USD/CAD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
BoC Expected to Slash Rates as Inflation Continues to Cool
On Wednesday, the Bank of Canada (BoC) is widely expected to slash its key policy rate by 50 basis points, marking the fourth consecutive rate cut this year. This move would bring the benchmark rate down to 3.75%, its lowest level in over 15 years outside the pandemic, as the central bank attempts to spur economic growth amidst slowing inflation and weak consumer spending. As Canadian inflation continues to cool—hitting just 1.6% in September—economic indicators like stagnant GDP growth and a faltering housing market have added urgency to the central bank's decision-making process. The rate cut, if realised, could trigger a strong reaction in USD/CAD, given its proximity to long-term resistance and the likelihood of volatility leading up to the decision.
Multi-Timeframe Analysis
Let’s take a trip through the timeframes, starting with the weekly candle chart. On this higher timeframe, USD/CAD has moved into a key area of long-term resistance, where a cluster of five major swing highs since October 2022 has formed a formidable resistance zone. What makes this level even more significant is that USD/CAD has carved out two higher swing lows over the last year, creating a broad ascending triangle pattern. This classic bullish setup signals that a breakout higher could be on the horizon, especially with the rate decision serving as a potential catalyst.
USD/CAD Weekly Candle Chart
Past performance is not a reliable indicator of future results
Moving down to the daily timeframe, the price action shows USD/CAD reacting to the resistance zone, but the reaction has been cautious. We're starting to see negative divergence on the RSI from overbought territory, suggesting that momentum is weakening. However, despite this divergence, the pair hasn’t shown a sharp pullback, which indicates that the bulls still have a foothold. The upcoming rate decision could either fuel a breakout above the resistance or lead to a deeper retracement if market sentiment shifts.
USD/CAD Daily Candle Chart
Past performance is not a reliable indicator of future results
Zooming in on the hourly chart, we get an even more detailed view. The market’s response to the resistance zone has been a low-volatility pullback, lacking the aggressive selling one might expect at such a key level. This suggests that USD/CAD could still make another push higher, testing deeper into the resistance zone before Wednesday’s decision. With volatility likely to ramp up as the rate announcement nears, all eyes are on how the pair handles this crucial level.
USD/CAD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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