Article by ForexTime

The USDCAD accelerated last week and challenged the yearly high (1.1277) on Friday afternoon as the Greenback strengthened against its counterparts. However, the pair failed to rise above the 2014 high and seems to have subsequently formed a “double top” pattern on the Daily timeframe. The pair is pulling back sharply as we head into the afternoon session, having already declined by nearly 70 pips today.

What is likely encouraging the pullback today is an acceptance among investors that although September’s NFP was impressive, Wednesday’s FOMC Minutes are unlikely to contain any hints regarding a possible timeframe for an interest rate rise in the US. Although US economic data is continuing to improve on a consistent basis and many are hoping for the Fed to transition to a more hawkish tone and openly discuss raising rates, this is unlikely to be rushed. As such, some profit taking on the Greenback is noticeable today, including the USDJPY.

Canadian economic sentiment has weakened slightly following fears of an oversupply of oil in the markets potentially having a detrimental impact on Canadian exports, as well as the recent Canadian GDP data missing expectations. I see the longer term potential for the pair to advance towards the 24^th May 2009 high on the Weekly timeframe (1.1354) in the future, but the Loonie is not quite ready for this bull move yet. Before the pair can progress to these highs, we require the right combination of hawkishness or indications of a rate rise from the Federal Reserve, alongside Canadian economic progress being halted by a combination of an oversupply of oil in the markets and the Royal Bank of Canada (RBC) maintaining its neutral position towards monetary policy.

Referring back to the technicals on the Daily timeframe, both the Stochastic Oscillator and RSI have each approached the overbought boundaries but are now pointing downwards, suggesting a pullback is in play. Potential support levels can be found at 1.12, 1.1175 and 1.1146. The pair is likely to find support around these levels and consolidate, before the FOMC minutes on Wednesday and employment report from Canada this Friday dictates the Loonie’s next direction.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

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Article by ForexTime

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