Following on from the original idea, the triangle pattern I previously highlighted has got quite a bit of attention on the trading floors and I continue to feel the prospect of an upside break is more likely. I continue to feel exiting trades on a move through C$1.2340 would be prudent and believe this could come from tomorrows Bank of Canada (BoC) meeting.
In the short term, I think the fact the 20-day moving average is headed perfectly sideways tells the story that we should be range trading the pair right now. Sell orders at C$1.2600 and buy orders at $1.2400 look compelling (or playing the Bollinger Band range). However, I still believe the sideways move is a continuation pattern and we are likely to see C$1.3000 in the coming months.
I think the market has done a reasonably good job in pricing out a rate cut from the BoC, so it will be down to the governor’s rhetoric and whether he indicates that rate cuts could be coming. Still, the prospect of the Federal Reserve removing its ‘patient’ stance with regards to rate hikes makes the USD still rather attractive, especially if yield spreads widen and make the USD more attractive.