USD/CAD Daily Fundamental Forecast – October 20, 2016

Yesterday was a very volatile day in this pair, as was expected with a host of Canadian related news and events lined up all through the evening. The overnight rate of the CAD was held at 0.5% which was on expected lines. Then came the monetary policy report which did indeed cut the growth forecasts to 1.1% as we had predicted but the report did not contain anything especially dovish and this seems to enthuse the buyers of CAD who were happy to indulge themselves in buying the CAD against the USD. The market had been overly pessimistic about the CAD and this provided an opportunity for the CAD buyers to exercise their optimism and the pair broke below 1.3100 and made an attempt towards 1.3000.

This was helped by the oil inventory data that was released in between the report and the BOC press conference which showed a huge dip in the inventory. This caused a pop in the oil prices and helped the CAD to strengthen further. As the pair was sitting near the support, the BOC conference began where the Governor Poloz talked about actively discussing more stimulus and also referred to waiting for more data to see if exports were affected permanently and hinted at taking action if that were so.

This was enough for the markets to pull the plug on the CAD and the USDCAD pair quickly made a full trip back towards 1.3120 where all the action began. So, the net result of all the news and events was that the pair ended up where it began.

On the bottom side, we continue to see some support at 1.3060 and strong support at 1.3000 and then at 1.2930. On the top, we see that the resistance at 1.3120 has been broken and the pair sits at 1.3141 as of this writing and we have the strong resistance at 1.3250 which is our next target. Traders can continue to trade the ranges until they see a breakout but we continue to be bullish on this pair especially after yesterdays comments from the BOC Governor and the price action after these events which suggest that there is strong buying at the support regions for this pair.

There are no major economic news scheduled to be released from Canada or the US today and so we can expect the after-effects from yesterday to continue to dominate the price action in this pair for today.