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USD/CAD was in a bullish run in June, and July looks to be the same so far, but will upcoming data from the U.S. and the latest monetary policy statement from the Bank of Canada change sentiment on the pair?

Will USD/CAD Rally Continue?

USD/CAD 4-Hour Forex Chart
USD/CAD 4-Hour Forex Chart

In his “Week Ahead in FX” post, Pip Diddy highlighted a couple of events that could be big catalysts for USD/CAD: the latest consumer prices data from the U.S.  on Tuesday and the latest monetary policy statement from the Bank of Canada on Thursday. Expectations are for the U.S. CPI number to take a small dip, while the BOC is expected to hold off on any changes to policy, but there is speculation out there that we may hint at another reduction in quantitative easing measures.

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If these scenarios play out, then the recent rally from around 1.2050 in June to current levels around 1.2500 may actually start to reverse, especially if we are surprised with further tapering from the BOC and U.S. CPI comes in even worse than 0.5% m/m. In this case, we’ll be on the look out for a break in the rising ‘lows’ pattern & previous support for a potential short-term bearish move in USD/CAD.

If we’re surprised with higher CPI data and no further tapering from the BOC, then the odds are pretty good the recent rally may continue to have legs, especially if broad risk sentiment continues to lean negative. The recent spike in COVID-19 cases has some traders running towards “safe havens” in case we see a slow down in the global pandemic recovery. 

In this scenario, traders would likely view the recent dip as a buying opportunity, and if we do see bullish reversal candles form between 1.2300 – 1.2400, then the odds look pretty good the market may move to the 1.2500 – 1.2600 area in the short-term.

What do you guys think? Will the top tier economic events coming soon push USD/CAD to new two month highs? Or will the rising ‘lows’ pattern break this week? 

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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