Today, the USD/CAD market faces a “double blow” from central banks:
→ At 16:45 GMT+3, the Bank of Canada will announce its decision. The rate is expected to be cut from 2.75% to 2.50%.
→ At 21:00 GMT+3, the Federal Reserve will follow with its own rate announcement.
Both events will be accompanied by statements from the central bank chairmen on future outlooks, and the USD/CAD market is likely to experience heightened volatility today.
Technical Analysis of the USD/CAD Chart
When analysing the USD/CAD chart earlier this month, we noted the formation of a symmetrical narrowing triangle (a sign of balance between supply and demand), bounded by:
→ a long-term descending channel (red), which has been in place since early February;
→ a short-term channel (blue), shaped by price fluctuations since mid-summer.
At that time, we suggested that supply and demand forces would keep USD/CAD in a temporary state of equilibrium until today.
Since then:
→ the price has reversed sharply from the upper boundary of the triangle (marked with an arrow);
→ on the eve of key announcements, the pair is attempting to consolidate below the lower boundary, signalling bearish pressure (in other words, a shift in balance in favour of supply).
Key observations:
→ the aggressive nature of the September support breakout (S);
→ the decline towards the critical 1.3725 level, which has acted as support since August.
Given the above, we could assume that the market is leaning bearish. Today’s announcements could trigger a downward impulse in USD/CAD – in this context, the chart may be interpreted through:
→ a potential breakout of the bearish flag pattern (formed by the blue channel);
→ prospects for the resumption of the broader downtrend within the red channel.
