Since the middle of December, the Canadian dollar has been on an absolute tear against the Greenback. Values of the USD/CAD have plummeted bringing a key downside support area into play. The next 24 hours will be huge for the Loonie, as the crude oil inventory cycle and Bank of Canada (BoC) are scheduled to take center stage.

With so many upcoming economic events on the docket, it is difficult to know for sure what to expect from the USD/CAD. Volatility will be certainly be heightened, which is a good thing from the perspective of an active trader.

USD/CAD Technical Outlook

The prevailing downtrend regarding the USD/CAD has given way to a pronounced “L” pattern on the daily timeframe. Price is rotating between valid support and resistance levels.

Here are the levels to watch for today’s action:

• Resistance(1): 20 Day EMA, 1.2546
• Resistance(2): Bollinger MP, 1.2576
• Support(1): 62% Fibonacci Retracement Sept. Low/Dec. High, 1.2388
• Support(2): Swing Low, 1.2355

Bottom Line: Ahead of Wednesday’s BoC interest rate decision, this market is likely to consolidate near the macro support level (1.2388) on limited participation. The BoC is projected to hike rates by ¼ point tomorrow at 10:00 AM EST, so volatility will be the order of the day.

Committing to a position in the USD/CAD with so much news on the horizon is a risky proposition. Executing a long scalping plan from 1.2388 may be the safest way to play this market. With a tight initial stop at 1.2374, this trade should be good for a modest 10-14 pip return.

As always, keep an eye on risk and use prudent leverage!