October 18th 2017
CAD strength continues
Coming out of Wednesday's overnight Asian trading session, we saw a brief bounce in the USD, bringing the pair (USD/CAD) to a high above 1.2530 during London's session. The USD gave up all of its early gains by 9 a.m, and the pair broke the 1.2500 level with force. At the time of writing price action is moving under 1.2475
1-minute chart USD/CAD
Friday the Bank of Canada is expected to announce a month over month and year over year uptick in inflation of 0.4%, bringing CPI figures to 0.4% and 1.4%, respectively. There is high event risk surrounding this data. I will be watching Thursdays price action to set up any potential opportunities to profit from the pair. A continued bullish position in the CAD, would bring the pair to levels at 1.2440/1.2400. A break below 1.2400 without any serious bidding would take the pair to the 1.2100 bottom reached in September.
Looking into 2018
8-hr USD/CAD chart
It was a great summer for the Loonie. Price action has broken the trend line that began at the beginning of May. Canada has been publishing very promising economic data and if the trend continues, the BOC will look to raise interest rates once more for the year. The market is pricing in an 80% chance of a rate hike on October 25th.
Market participants are still expecting a rate hike in December for the Federal Reserve. Fed officials have also said three (3) rate hikes in 2018 would be their target. US Mulinational Dollar Repatriation for multinationals will also give a boost to the USD moving forward. Repeal and replace of Obamacare and tax reform have been priced out of the USD/CAD pair.
A break above 1.2600 level would indicate a strong test of 1.3000, while a break below 1.2400 could take us down to the September lows of 1.2100. I will be watching this pair closely for the remainder of the Fall and Winter 2018.