USDCAD: Forex Analysis – Bank of Canada chair says rate cut is possible

By IFCMarkets

Bank of Canada chair says rate cut is possible

Canadian dollar significantly fell against the US dollar after the recent Bank of Canada meeting that took place on Thursday January 18, 2017. Will USDCAD continue advancing?

Bank of Canada left the interest rate unchanged at 0.5%. But its president Stephen Poloz said the rate may be cut as Canadian economy needs the monetary support in case US revise the NAFTA agreement (North American Free Trade Agreement). Previously the newly elected US president Donald Trump said he will seek for dissolution of NAFTA trade agreement. Lower rate as a rule makes national currency weaken. Bank of Canada last cut interest rate in July 2015. The December inflation data will come out in Canada on Friday. We believe the tentative outlook is more or less positive for the Canadian dollar. If the forecast comes true, the growth may slow down slightly.

On the daily chart USDCAD: D1 is correcting up after the false break through its 200-day moving average. Further increase is possible in case the negative economic data come out in Canada and in case of dissolution of NAFTA treaty.

• The Parabolic indicator gives bullish signal.
• The Bollinger bands have narrowed which means lower volatility.
• The RSI is near 50, it has formed positive divergence.
• The MACD indicator is giving bullish signal.

The bullish momentum is possible in case Canadian dollar surpasses the last fractal high at 1.33. This level may serve the point of entry. The initial stop-loss may be placed below the Parabolic signal and the last fractal low at 1.3. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 1.3 without reaching the order at 1.33, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets