USD/CAD: Bank of Canada and oil prices _13/04/2016

Trading recommendations

Buy Stop 1.2820. Stop-Loss 1.2780. Take-Profit 1.2900, 1.2955, 1.3100, 1.3200, 1.3245

Sell ​​Stop 1.2750. Stop-Loss 1.2810. Take-Profit 1.2700, 1.2635, 1.2600, 1.2200

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Overview and Dynamics

At the March meeting of the Bank of Canada left interest rates unchanged. It is expected that the rate will also remain unchanged at 0.5%.

At 14:00 (GMT) today scheduled publication of the decision on interest rates and accompanying statement of the Bank of Canada. At 15:15 will host a press conference of the Bank of Canada, in which the central bank chief Stephen Poloz will answer questions and highlight the bank's plans in the light of future monetary policy. The Bank of Canada is going to stick to a soft monetary policy to maintain the country's economy, and to achieve the target rate of inflation is allowed to decrease the interest rate to a negative value of -0.5%.

In the time period from 12:30 (GMT) to 18:00 in the financial markets is expected to surge in volatility. At 12:30 the US published important inflationary indicators, among them - the index of producer prices and retail sales in the US in March. According to the forecast is expected to improve performance in comparison with the previous month, which should have a positive impact on quotations of the US dollar.

The rapid growth of the pair USD / CAD since July of last year from the level of 1.0650 to 1.4680 mark by almost 50% offset by an equally rapid decline in pairs with the beginning of the year. The fall of the pair was due primarily to the increase in oil prices bottomed near the mark of 27.00 dollars per barrel of Brent crude oil. The Canadian economy, export-oriented, with a significant share of exports is the export of energy resources, more favorable low exchange rate of the national currency, since it directly affects the content and the formation of the state budget, and supports Canadian exporters. The current strengthening of the Canadian dollar, for sure, is perceived more negatively than positively the leadership of the central bank of the country. And, most likely, this theme will be reflected in S.Poloz speech. From the tone of speech and text accompanying statement the Bank of Canada will directly depend on the dynamics of the subsequent movement of the Canadian dollar, but probably only in the short term.

A much greater impact on the quotes of the Canadian dollar has the dynamics of oil prices. The higher oil prices, the stronger the position of the Canadian currency.

Another important argument for moving the pair USD / CAD is the monetary policy of the Fed. In this regard, it is necessary to pay attention to yesterday's statement by the President Federal Reserve Bank of San Francisco and the FOMC members John Williams, during which he said that suggests the possibility of two or three rate increases in 2016. And this is certainly a positive factor for the US dollar in the currency market.

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Technical analysis

Since last July, the pair USD / CAD rose to 1.0650 level for 4000 points to a mark of 1.4680, but from January 20, began a rapid fall in the pair, caused primarily an increase in oil prices. Then oil prices very close to the mark of $ 27 per barrel of Brent crude oil.

Pair USD / CAD almost 50% regained its losses, trading currently near the 1.2800 mark. OsMA and Stochastic indicators on all time periods with a 4-hour on-month point to further decline, especially since oil prices continue to rise in the run-up to the meeting in Doha on April 17 representatives of major oil producing countries.

If an agreement is reached on the freezing of oil production levels, even without the participation of Iran, the price of oil may continue to rise to the level of $ 45 per barrel of Brent crude oil. The pair USD / CAD, in this case, will react further decline. Up to 50% Fibonacci level, which is located near the 1.2635 mark, there is still a little more than 150 points.

On reversal of the downtrend in the pair USD / CAD can only say after the price consolidates above $ 1.3245 (EMA200 on the daily chart).

Alternative scenario with the development of a downward movement is related to the breakdown of the support level 1.2635 and further drop to the level of 1.2170 (EMA144 on the weekly chart and Fibonacci level of 61.8%).

Support levels: 1.2755, 1.2635

Resistance levels: 1.2955, 1.3100, 1.3200, 1.3245

 

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