USD/CAD – Trading the BoC Statement with US GDP in Mind

USD/CAD - Trading the BoC Statement with US GDP in Mind

The Canadian Dollar has come under pressure because economic data out of Canada has gone against the optimistic outlook from Stephen Poloz and the Bank of Canada (BoC). Let’s take a look at the USD/CAD and prepare ourselves for the upcoming BoC statement as well as other fundamental risks this week.

USD/CAD 4H Chart
usdcad 4h chart 5/27
(click to enlarge)

The USD/CAD has been rallying sharply from a low on the year at 1.1903 to 1.2447 this week before stalling ahead of the BoC statement. We can see that price action has shifted from a bearish market to a bullish one, breaking above key resistance levels as well as the 200-, 100-, and 50-period SMAs. The RSI has also pushed above 70 and held above 40 after a pullback. This bullish swing is not only due to the soft CAD but can be mostly attributed to the recent USD-strength. The fundamentals should support further upside.

However, as we have seen in this year’s BoC statements, Stephen Poloz seems to be optimistic about the economy despite many calling for a rate cut. now, if price falls back below 1.24 after the BoC statement, it would probably be due to a non-dovish BoC statement. However, because there is a key US GDP release on Friday, we should limit our bearish outlook on the USD/CAD and look out for support first around the 1.2256 support/resistance pivot, especially if the RSI is able to turn up before breaking below 40. In this scenario, we should look for USD/CAD to come back to the highs on the year around 1.28.

USD/CAD Daily Chart 5/27
usdcad daily chart 5/27
(click to enlarge)

Now, if USD/CAD continues falling, the next key support will be around 1.2163, which is another support/resistance pivot. A bullish market should hold above this pivot, so let’s see how the market reacts after Friday’s GDP data.

If USD/CAD does not fall below 1.2163, or does but rebounds above 1.2163 to close the week, we should look for a bullish continuation scenario.

To the downside, a break below 1.21 will likely be needed to convince the market that USD/CAD is still bearish, which puts the 1.19-1.1905 area in sight.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at