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Will the BOC react to higher CPI?

Resistance Coming Up For USD/CAD

Posted Tuesday, November 19, 2019 by
Shain Vernier • 1 min read

A perfect storm of fundamentals has hit the USD/CAD, sending exchange rates skyward. Plunging January 2020 WTI crude oil prices and dovish comments from Bank of Canada (BoC) Senior Deputy Governor Wilkins have prices north of 1.3250. For the time being, bidders are in full control of the action.

Earlier today, BoC official Carolyn Wilkins issued public comments on the state of the Canadian economy. The key statement suggested that while 1.75% policy rate is low, “there is still room to maneuver.” In addition, Wilkins highlighted the fact that the BoC has the ability to conduct large-scale asset purchases as a tool for navigating challenging economic times. The statements were not well received by Loonie backers, with many choosing to exit short positions in the USD/CAD.

Fibonacci Resistance In View For The USD/CAD

At press time (about 2:30 PM EST), the USD/CAD has rallied more than 50 pips. Rates are above 1.3250 and pushing north.

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

There is one resistance level on my radar for the remainder of the session:

  • Resistance(1): 78% Retracement, 1.3280

Bottom Line: Until elected, I will have sell orders queued up from 1.3280 in the USD/CAD. With an initial stop at 1.3312, this trade produces 25 pips on a sub-1:1 risk vs reward ratio.

In addition to the BoC activity and this morning’s losses in WTI crude oil, today marks the beginning of the weekly oil inventory cycle. If you are holding open positions in the USD/CAD, be sure to keep an eye on this afternoon’s API Crude Oil Stocks number and tomorrow’s EIA report. Consensus expectations are predicting that supplies will come in positive; if this is the case, we may be in for further weakness in WTI pricing and a continued rally in the USD/CAD.

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