Canadian Dollar Price Forecast: USDCAD Pulls Back to Support post-BoC

Canadian Dollar Price Forecast:

• This morning’s Bank of Canada rate decision brought upon a strong Canadian Dollar.
• This allowed USD/CAD to pullback to a key area on the chart, a price that had set support in late-August showed as resistance last week. But after this week’s breakout, that level has may be repurposed as support.
• Can bulls continue to drive USD/CAD? If there is a grander USD-recovery theme at play, the long side of USD/CAD may hold some attractiveness for those looking at bullish US Dollar themes.
• The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

USD/CAD Pulls Back After Strong Breakout to Start the Week

It’s been a rough summer for US Dollar bulls as the currency has spent much of the past few months in varying forms of sell-off. But with Labor Day now in the rear view mirror the potential for change is afoot; and the USD has begun to bounce from a key area of longer-term support that may soon allow for the longer-term tides to turn.

This theme has been on full display in USD/CAD of recent. Towards the end of August, as USD bears were getting their run, USD/CAD had built into a descending triangle-like pattern, with horizontal support at a confluent spot on the chart around 1.3150 as sellers continued to produce a series of lower-highs. As looked at in the webinar a few weeks ago, that impasse was unlikely to last, and given the harboring potential of a descending triangle pattern, this kept the door open to bearish breakdown potential – which is what ended up happening in the week after.

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That bearish breakdown showed a clean and strong run down for a re-test of the 1.3000 handle – the same level that loomed large around the beginning of this year; and that’s the point where the proverbial music stopped for USD/CAD bears as the pair began to dig its heels into support.

USD/CAD Four-Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

After last week’s hold of support around the 1.3000 psychological level, buyers posed a quick push up to the same 1.3130-3150 area that had caught support in the previous week. This zone even elicited a bit of resistance, albeit temporarily; but USD/CAD bulls returned in the early-portion of this week to stage a strong topside breakout, allowing for prices to rally up to the 1.3250 area on the chart, which held into this morning’s Bank of Canada rate decision.

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USD/CAD Two-Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

As looked at in yesterday’s webinar, the bullish breakout in USD/CAD appeared to mirror the similar theme showing in the USD with the addition of some CAD-weakness. After this morning’s Bank of Canada rate decision, prices in the pair fell back to that familiar zone around 1.3130-1.3150 and has begun to show a bit of support.

This keeps the door open for bullish strategies in the pair, particularly for those looking to on-board USD-strength into their approaches.

USD/CAD Hourly Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX