USD/CAD soars and breaks above 1.3250 amid risk aversion

USD/CAD rises almost a hundred pips from yesterday’s low, points to a reversal and to close the bearish gap.
Key event ahead: Bank of Canada decision.

Matías Salord FXStreet

The USD/CAD pair has risen almost a hundred pips from the daily low, making a significant reversal. The loonie is among the weakest currencies, ahead of tomorrow Bank of Canada decision.

Concerns from the US bond market about the economic outlook in the US, about how far, can the current economic cycle run, is pushing equity prices sharply lower and boosting the demand for the yen and the US dollar. The Loonie is among the most affected currencies.

Earlier today the USD/CAD tested weekly lows near 1.3160 but then turned to the upside and initially rose back above 1.3200. During the last hours broke above 1.3220 and jumped to 1.3257 hitting a fresh daily high. Price remains near the top and appears to be headed to fill the bearish gap that followed Monday’s opening at 1.3235 after having closed on Friday near 1.3300.

The greenback is up as the US yield curve continues to flatten while equity prices in the US tumble. The Dow Jones drops more than 700 points or 2.70%. The slide in equity prices and a lower 10-year yield (2.89%, lowest since September) favored a rally of the yen.

On Wednesday, the Bank of Canada will announce its decision on monetary policy. No change in rates is expected and will likely stay unchanged at 1.75%. BoC rose rates in October, and some analysts see more rate hikes in 2019. The ongoing situation with volatility across financial markets, the decline crude oil prices and recent speculation about the Federal Reserva policy stance, could change expectations for BoC for next year.

USD/CAD Levels to watch

Resistance levels could be located at 1.3265 (Nov 13 and 14 high), 1.3290 and 1.3325. On the flip side, now 1.3220 has become the immediate support followed by 1.3200 and the weekly low at 1.3155/60.

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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