Technical Sentiment: Bearish

Key Takeaways

• Bank of Canada left rates unchanged at 1%;
• U.S. Factory Orders surged 10.5%, just below the expected consensus of 10.9%;
• USD/CAD trades below 1.0900 as buying pressure fades;

USD/CAD bulls are retreating ahead of two extremely heavy days. Trade Balance, Employment Changes and Unemployment Claims and Rates from U.S. and Canada are due Thursday and Friday; with expectations for volatile moves running high.

Technical Analysis

Wednesday didn’t offer any major surprises as Bank of Canada maintained interest rates at 1% while U.S. Factory Orders were pretty much in line with expectations. This state of relative quiet allowed dollar bulls to settle down a bit, giving USD/CAD a temporary chance to correct lower.

From a technical perspective, USD/CAD remains bearish in the short term as indicated by multiple Lower Lows formed throughout August. Price topped at 1.0942 in early Asian trading, forming a temporary Lower High, hinting at potentially further weakness. The pair is currently trading around 1.0888, flirting with a support cluster formed by 200 Simple Moving Average on the 4H time frame and the 200-Day SMA. A close below 1.0875 will open the way towards 1.0813/20 in the next few trading sessions, preserving the bearish direction expressed by the configuration of lower lows and lower highs. If 1.8013 will be breached, USD/CAD will extend losses towards 1.0715, where traders will be confronted with a long term decision.

A spike above 1.0942 will invalidate the previously mentioned bearish scenario, forcing price to accelerate up to 1.0985 and possibly 1.1025 before the end of the week.

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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets