USD/CAD near multiyear highs ahead of FOMC wrap today

on Mar 19, 2014
Updated: Oct 21, 2019

**, Wednesday 19 March:**

The Canadian dollar yesterday took a big hit against its US peer, following a speech by Bank of Canada governor Stephen Poloz. And the USD/CAD earlier today rose to a 27-day high of 1.11783, a whisker away from the multi-year peak at 1.12238 reached on the last day of January.
According to analysts at Scotiabank, the key to the slump was Poloz signalling “the expectation that the output gap will merely close within a couple of years and not trip into excess demand that would risk stoking inflation pressures beyond that time frame [end-2015]”.

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The bank’s formal projections stretch only to the fourth quarter of 2015, “so this longer run guidance is material to a low for long dovish BoC bias beyond the printed forecast”.
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The currency pair yesterday traded near 1.1029, the 38.2 percent Fibonacci retracement of the range from late-January. And so far today, the price action has breached a line of resistance, opening the door to a potential upside breakout.

Technical strategists at SEB Group reckon that “the bull triangle is now with a high degree of certainty completed and [that] an upside break is thus imminent”.

The fact that downswings within the triangle developed slowly and ended with impulsive moves higher “clearly shows which side the market is afraid of”, according to the SEB chartists. “The triangle size suggests an approximately three big figure move higher exiting the triangle (minimum target = passing 1.1225).”

Today traders in the USD/CAD will be attuned to the monetary policy decision of the US Fed’s Federal Open Market Committee, due out at 18:00 UTC. The Committee is pretty much universally expected to announce a further $10 billion reduction in the pace of its monthly bond-buying, reducing it to $55 billion.
The current meeting is the first under the leadership of new Federal Reserve chair Janet Yellen, who is scheduled to hold a press conference at 18:30 UTC.


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