USD/CAD Forecast: Stuck in a symmetrical triangle ahead of BOC rate decision

USD/CAD is set to end the week with 0.34 percent gains at 1.3369, having found bids below 1.33 on Wednesday. 

Notably, the currency pair has defended the psychological support of 1.33 on weekly closing basis for the third straight week. 

Sellers failed to keep the pair below 1.33 despite oil’s rally to fresh highs since November. (Brent clocked a high of $72.53). Growing expectations that the Bank of Canada will adopt a neutral shift next week may have hurt the Canadian dollar. 

Even so, it is too early to adopt a bullish stance, as the pair is trapped in a narrowing price - known as symmetrical triangle pattern in technical parlance - since early March. 

The range breakout may happen next week depending on what the BOC says and the action in the oil markets. 

Focus on BOC rate decision due at 14:00 GMT on April 24

Canada’s central bank is expected to keep the interest rates unchanged at 1.75 percent and shift to neutral bias from tightening bias, as recent macro data releases have shown the economy slowed down in the first quarter. 

Notably, the central bank’s quarterly gauge of business intentions and optimism released this week showed the overall business sentiment turned negative in the first three of this year, as opposed to the positive reading seen in the final quarter of 2018, according to Wall Street Journal. 

The details of the report revealed growing concerns regarding external demand and housing sector slowdown. 

Add to that the recent dovish turn by the major central banks and the BOC has little reason to hold on to its tightening bias. 

Further, the BOC is also expected to revise lower its 2019 GDP forecast, currently at 1.7 percent, and sound cautious on inflation. 

The repeated defense of 1.33 over the last three weeks despite the oil rally indicates the shift to neutral bias may have been priced in by investors. In fact, rates markets have begun pricing in a year-end rate cut. 

The contracting triangle seen in USD/CAD’s daily chart could be breached to the higher side if the BOC surprises with an outright dovish bias. It is worth noting that the long-term technical charts are biased bullish. So, an upside break of the symmetrical triangle would not be a surprise. 

Daily chart

The above chart shows:

  • USD/CAD has created a symmetrical triangle. 
  • The 50-day MA, currently biased bullish at 1.3117, has served as strong support over the last four weeks.  
  • The pair closed with 0.24 percent gain, validating the strong dip demand below 1.33, signaled by yesterday’s long-tailed candle.
  • The 14-day relative strength index (RSI) seems to have established strong support at 47.00. 

The probability of USD/CAD breaking the triangle on the higher side is high. A range breakout could be followed by a rally towards January highs above 1.3660. 

A bearish reversal would be confirmed if the RSI breaks below the support at 47.00. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD drops to mid-1.13s on Bullard's hawkish remarks

St. Louis Fed President Bullard dismissed the idea of a 50 basis points rate cut in July and helped the greenback start recovering its losses. Meanwhile, FOMC Chairman Powell reiterated FOMC saw a stronger case for more accomodation.


GBP/USD eases further, holds above 1.2700

GBP/USD hit 1.2783 before changing direction, now closing to the 1.2700 figure. Broad dollar's weakness keeps the downside limited, despite subdued demand for Sterling.


USD/JPY slumps below 107 on dismal US data, risk aversion

The USD/JPY pair came under a renewed selling pressure in the American session and dropped below the 107 mark amid the ongoing broad USD weakness and the stronger demand for safe havens.


All that glitters is gold ahead of G-20 summit

Investors sought shelter in safe haven assets with gold prices surging above six-year high level and the yen strengthening due to ongoing geopolitical uncertainties, as well as investor caution ahead of today’s Fed Chairman speech and the Trump-Xi meeting on the sidelines of G-20 summit this Saturday.

Read more

Gold consolidates recent upsurge to multi-year tops, comfortable above $1400 mark

Gold adds to the post-FOMC upsurge amid escalating geopolitical tensions. A modest USD uptick/stability in equity markets prompts some profit-taking. The downside remains limited ahead of Powell’s speech later this Tuesday.

Gold News