USD/CAD

USD/CAD Gaps Down On BoC Rate Hike

Posted Wednesday, October 24, 2018 by
Shain Vernier • 2 min read

Volatility has been the story of the day for the USD/CAD. A few minutes ago, the Bank of Canada (BoC) raised prime lending rates to 1.75%. The quarter-point move came as no surprise, yet a dramatic GAP down on intraday time frames has ensued. At the moment, it appears that forex players are taking a shine to the Canadian dollar.

In a live market update from yesterday, I broke down the two-day consolidation phase in the USD/CAD and offered a trade recommendation. While good for a fast 15 pips, the play ultimately fell short of the desired profit target (25 pips). Trading during times of heavy volatility is a challenge ― it is important to always use stop losses and lock in fast profits when the opportunity arises. This is certainly a complex topic and one that will be addressed thoroughly in a coming weekend update.

At press time, the USD/CAD continues to trade to the bear. A BoC press conference is scheduled for 11:15 AM EST, so more volatility is possible. Be sure to keep an eye on your news feed if you are actively trading the Loonie.

USD/CAD Technicals

It was not hard to determine that a breakout was in the cards for the USD/CAD. Tight daily ranges typically lead to eventual directional moves. In this case, the BoC Interest Rate Announcement was the fundamental driver of the action.

USD/CAD, Daily Chart
USD/CAD, Daily Chart

Here are a few levels to watch for the remainder of the session:

  • Support(1): Bollinger MP, 1.2977
  • Support(2): Daily SMA, 1.2949
  • Support(3): 62% Current Wave Retracement, 1.2892

Bottom Line: Given today’s charged news cycle, anything is possible for the Loonie. In the event that we see more weakness, the outlined daily support levels may come into play. Tight 1:1 risk vs reward scalps to the long from each of the support levels are not bad trades to the bull.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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