Ahead of the BOC rate decision. What is the situation on the USDCAD?
|Long-term situation here is definitely bearish but for the second half of the year, mid-term buyers were benefiting from the bullish correction. Correction is locked inside a flag formation and managed to retrace exactly 50% of the main downtrend. Bounce from the upper line of the flag and 50% Fibonacci can be a sell signal itself but it would be much better to look for more selling factors in the lower timeframes.
On the H4 and H1 we can see that for the last two months, the price found an important support around the 1.33 (38,2% Fibonacci). This support was recently positively tested twice but was finally broken at the beginning of the December. This opens the way to the lower line of the flag and creates an opportunity for the 200 pips downswing. It is also probable the the price would like to test the next Fibonacci line (23,6%), where also the lowest price from October and the 1,3 psychological barrier are. All together it makes this area a desirable target for the supply.
Bearish scenario will be denied once the price will manage to come back above the 38,2% Fibonacci, so in terms of the risk to reward ratio, this setup created a good looking trading opportunity. That is it from the technical point of view but we have to keep in mind that we are ahead of BOC rate statement today, which will have a huge impact on this pair. Any dovish surprise from the BOC can destroy whole technical setup here but that is just how the market works and we cannot do nothing about it.
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