This article is originally referred from IronFX Research and Analysis.
• The dollar traded lower or unchanged against most of its G10 counterparts during the European morning Wednesday. It traded lower against NZD, NOK, CHF and CAD in that order, while it was higher only versus GBP. The greenback remained virtually unchanged versus AUD, SEK, JPY and EUR.
• Without any major market moving events so far, investors are likely to keep their attention on the Bank of Canada rate decision due later in the day. The Bank is widely expected to stand pat at this meeting, given that the economy’s outlook has not changed significantly since the last gathering. Oil prices remained flat on average, while the core inflation rate barely slid. Having also in mind that the government’s fiscal stimulus measures that were announced in March are still in the pipeline, we agree that BoC officials are likely to take the sidelines. Even though the Bank could highlight some risks to Canada’s outlook such as potential “Brexit” effects, we believe that the recent moves in global markets may comfort officials that the vote impact could remain relatively contained. As a result, we expect the Bank to maintain a neutral tone overall, something that may keep the reaction in CAD somewhat limited.
• USD/CAD traded lower during the European morning Wednesday after it hit resistance at 1.3080 (R1). Given that there is no clear trending structure, I would prefer to take the sidelines as far as the short-term picture is concerned. However, our short-term oscillators give signs that the rate may continue trading south for a while. The RSI turned down and looks ready to fall below 50 soon, while the MACD, although positive, stands below its trigger line and points down. I believe that the bears are likely to aim for the 1.2985 (S1) support zone, where a decisive dip may prompt extensions towards the 1.2915 (S2) hurdle. As for the bigger picture, USD/CAD is trading within a possible triangle formation, which has been containing the price action since the beginning of April. As a result, I would consider the longer-term outlook to be flat as well. I prefer to wait for the exit out of the pattern before I arrive to any conclusions about the forthcoming trending direction.
• Support: 1.2985 (S1), 1.2915 (S2), 1.2875 (S3)
• Resistance: 1.3080 (R1), 1.3140 (R2), 1.3185 (R3)
Original Source: IronFX Research and Analysis