USD/CAD FIST ANALYSIS: Bank of Canada Meeting Preview
Hi traders, here is a preview of the USDCAD pair ahead of the BoC meeting later today.
Canada reported strong market indicators during this month. The Ivey PMI was reported at 72.9 vs 62 expected, and employment change and the unemployment rate beat forecasts significantly.
This led to rumors that the BoC could increase their economic outlook for 2021 (which is likely) and that the Bank could begin quantitative tapering as early as this Summer.
Now, the problem is that most of the good news is already priced in the market.
Hedge funds have been heavily bullish on CAD, but have started to trim their long positions since early March. This could increase selling pressure in the currency, and cause a "buy the rumor, sell the fact" effect after the BoC meeting.
Falling oil prices have also been bullish for USDCAD (blue line, inverted), but Canadian vs US 2-year yields remain bearish for the pair.
Now, technials show a strong uptrend this week as markets are positioning themselves for a weaker CAD ahead of the meeting. This morning, the pair broke above a bullish flag pattern and continued higher on strong buying volume. Since most of the good news is already priced in the Canadian dollar, a dovish surprise could shoot the pair higher, possibly retesting the March highs around 1.2750.
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Canada reported strong market indicators during this month. The Ivey PMI was reported at 72.9 vs 62 expected, and employment change and the unemployment rate beat forecasts significantly.
This led to rumors that the BoC could increase their economic outlook for 2021 (which is likely) and that the Bank could begin quantitative tapering as early as this Summer.
Now, the problem is that most of the good news is already priced in the market.
Hedge funds have been heavily bullish on CAD, but have started to trim their long positions since early March. This could increase selling pressure in the currency, and cause a "buy the rumor, sell the fact" effect after the BoC meeting.
Falling oil prices have also been bullish for USDCAD (blue line, inverted), but Canadian vs US 2-year yields remain bearish for the pair.
Now, technials show a strong uptrend this week as markets are positioning themselves for a weaker CAD ahead of the meeting. This morning, the pair broke above a bullish flag pattern and continued higher on strong buying volume. Since most of the good news is already priced in the Canadian dollar, a dovish surprise could shoot the pair higher, possibly retesting the March highs around 1.2750.
Find our posts interesting? Please hit the "LIKE" button to support us in our work. Thanks a lot!
