A1 Trading Company

March 10, 2021

USD/CAD Deep Dive: Are We Going To Continue Pushing Lower?

Bart Kurek

Price action has been pretty much one-directional since the initial Covid-19 outbreak in March 2020 as the pair is now on an eleven-month bearish run, consistently creating new lows and now nearing 1.25, a significant psychological level.

Looking at the daily timeframe chart above, major psychological levels are marked by the blue horizontal lines. Price has been forming chart patterns like the descending triangle at the top before breaking through each level.

Currently, price is right at the channel's top and consolidating around it. As 1.25 is the lowest price has reached so far, we are now asking ourselves whether this bear run could be nearing an end or if price will continue pushing lower.

We also have this bearish order block (OB) visible between 1.272 - 1.276, an area to potentially catch a sniper reversal. Most retailers will be going short right at the channel's top, at around 1.269.

We know that banks manipulate price, and therefore I am expecting price to break out of this channel's structure once there is enough liquidity at that OB, until most retailers will change bias, where banks will then reverse and most likely continue pushing to the downside.

On Wednesday the 10th of March at 15:00 GMT, we have the BoC Rate Statement, which is the primary tool the BoC uses to communicate with investors about money supply and interest rates in Canada to meet macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity. Overall, they discuss the economic outlook and offer clues on the outcome of future decisions.

A source from the investment banking group MUFG stated their expectations for the BoC meeting today. They stated "The BoC is expected to acknowledge the stronger growth outlook. Growth in Q4 was twice as strong as the BoC had expected. It is encouraging expectations that the BoC will eventually bring forward plans to tighten policy… The BoC will face a difficult challenge if it wants to dampen the pace of the move higher in Canadian yields in light of improving fundamentals. The BoC is likely to reiterate that it does not plan to raise rates until 2023 at the earliest. The higher price of oil and favourable yield spread developments continue to favour a stronger CAD. It will be hard for the BoC pushback this week".

The Canadian Dollar's primary drivers include the monetary policy. Expectations for policy tightening will likely support CAD, while expectations for policy easing will likely pressure CAD.

The next main driver is Oil, which is Canada's largest export, accounting for over 17% of Canada's exports. As such, CAD is highly correlated with oil prices; strengthening when oil prices rally and weakening when oil prices fall.

We have gathered here that as growth in Q4 was twice as strong than the BoC had expected, it is likely the BoC will bring forward plans to tighten policy, which we know will support and strengthen the CAD. This further supports our bias on USD/CAD as it is likely price will continue pushing lower, breaking through further psychological levels.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

Dollar Remains Strong

Indices recover from Friday's lows as the dollar index hovers at break even. The mounting tensions in Israel-Iran escalated market worries, but financial earnings have kicked off to a good start. EdgeFinder Analysis Retail Sales came in higher than expected which is a good sign for the economy. It's also strong for the USD as […]

Read More
Hotter CPI Shakes Markets

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut. EdgeFinder Analysis EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher […]

Read More
Key Inflation Data Weighs on Investor Sentiment

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come. EdgeFinder Analysis We have been […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram