Next Monday is a bank
holiday for Canada but Wednesday brings the much-anticipated Bank of Canada
decision on rates. The early expectatin that Canada would be the first of the G7
countries to raise rates has been – throughout summer – discounted to varying
degrees. The Bank of Canada has had to rely on strong data to justify remaining
hawkish. Today’s GDP release was just 0.1 better than expected but the loonie
rally that followed put an exclamation point on what traders think the BOC will do
Wednesday.
The USD/CAD has continued to sink and
in great part due to the U.S. dollar weakness. The Fed promise of stimulus and
the BOC’s hawkishness are keeping the USD/CAD in a downtrend. The only thing that
is likely to derail this trend is a disappointing BOC where there is no rate
hike (which despite being partially discounted will none-the-less initially cause
some loonie weakness) but that could be tempered by a very clear and hawkish
statement.
Past performance is not indicative of
future results
The
USD/CAD downtrend continues because of the opposing stances of the of the U.S.
and Canadian central banks.
One of the concerns however is that despite
a very weak U.S. Dollar Index – which broke lower through a daily bear flag before
Bernanke’s Jackson Hole speech – the USD/CAD has been unable to break lower
through recent support at 0.9841. This does reflect some hesitation on the part
of loonie bulls to continue to strengthen the currency. This shows that there
is some fear that the BOC will disappoint.
While there is a growing expectation of
rates remaining at 1.0% the kind of loonie rally that today’s GDP created tells
me there is still some hope of a hike.
The bias towards tightening remains
but there is some concern it may not be as strong. Loonie bulls, be ready for a
strong correction if the language of the statement is weak.
As an
active forex trader and Chief Currency Analyst for InterbankFX.com I do write
for a number of sites all over the web and I am happy to say that I will be
posting updates atwww.IBFXconnect.com. MyActivity Boardwill feature the trades from my trading account as well as
intraday commentary.
Start the discussion! Questions?
Comments. Leave it here at the Daily Forex Trading Edge for Raghee to
personally answer. Using the icons at the top of the article to forward this
update to a friend via email, post it on Google or Facebook or simply print it
out for reading later.
Forex trading is one of
the riskiest forms of investment available in the financial markets and
suitable for sophisticated individuals and institutions. The possibility exists
that you could sustain a substantial loss of funds and therefore you should not
invest money that you cannot afford to lose.
Posted By:
Raghee Horner
Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
Next Monday is a bank holiday for Canada but Wednesday brings the much-anticipated Bank of Canada decision on rates. The early expectatin that Canada would be the first of the G7 countries to raise rates has been – throughout summer – discounted to varying degrees. The Bank of Canada has had to rely on strong data to justify remaining hawkish. Today’s GDP release was just 0.1 better than expected but the loonie rally that followed put an exclamation point on what traders think the BOC will do Wednesday.
The USD/CAD has continued to sink and in great part due to the U.S. dollar weakness. The Fed promise of stimulus and the BOC’s hawkishness are keeping the USD/CAD in a downtrend. The only thing that is likely to derail this trend is a disappointing BOC where there is no rate hike (which despite being partially discounted will none-the-less initially cause some loonie weakness) but that could be tempered by a very clear and hawkish statement.
Past performance is not indicative of future results
The USD/CAD downtrend continues because of the opposing stances of the of the U.S. and Canadian central banks.
One of the concerns however is that despite a very weak U.S. Dollar Index – which broke lower through a daily bear flag before Bernanke’s Jackson Hole speech – the USD/CAD has been unable to break lower through recent support at 0.9841. This does reflect some hesitation on the part of loonie bulls to continue to strengthen the currency. This shows that there is some fear that the BOC will disappoint.
While there is a growing expectation of rates remaining at 1.0% the kind of loonie rally that today’s GDP created tells me there is still some hope of a hike.
The bias towards tightening remains but there is some concern it may not be as strong. Loonie bulls, be ready for a strong correction if the language of the statement is weak.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
Start the discussion! Questions? Comments. Leave it here at the Daily Forex Trading Edge for Raghee to personally answer. Using the icons at the top of the article to forward this update to a friend via email, post it on Google or Facebook or simply print it out for reading later.
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Raghee Horner