USD/CAD is back to retest a strong resistance level this week. And with top tier catalysts from both Canada and the U.S. this week, we may see very quickly who may win out between the bulls and the bears.
USD/CAD Resistance Retest
On the one hour chart above of USD/CAD, we can see the market has made its way back to a very strong area of interest (between 1.2750 – 1.2800) that has repelled the bulls a few times in the new year.
Today’s rally off of a strong Dollar and a reaction to the Keystone XL permit news (Biden to yank Keystone XL permit on first day of presidency) is likely a short-term catalyst, especially with the focus likely to switch to the up coming monetary policy statement from the Bank of Canada. Expectations are for a “micro cut” of 0.10% to 0.15%, which would likely bring short-term volatility to USD/CAD.
We’ve also got a potential catalyst from the U.S. in the form of the inauguration of Joe Biden to become the next President of the United States. And with that appointment, we could see a flurry of policy changes on the very first day, which may also draw traders to take action soon after. It’s likely this event is already price into the pair, but if we do see any surprise, we should be ready to adapt on the fly.
So for the bulls out there, watch out for a break above the strong area of interest before considering a long position, and only do so if we see a deeper cut to interest rates than expected from the BOC, as well as a more dovish that expected rhetoric from the Bank of Canada’s press conference.
If they don’t cut at all, there could be a rebound in the Loonie off of the event, and if risk sentiment is leaning positive this week (or oil is rebounding), that could spark a reversal in USD/CAD where we could see 1.2600 by the end of the week.
What do you guys think? Is USD/CAD ready to breakout one way or another from the strong resistance area? Or will we see choppiness ahead?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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