Current trend

Following the Bank of Canada’s monetary policy decision on October 23, the USD/CAD pair reached the 1.3885 resistance level.

The regulator changed the interest rate by –50 basis points from 4.25% to 3.75% amid a slowing economy and weakening inflationary pressures. The September consumer price index fell from 2.0% to 1.6% YoY against the forecast of 1.8%, reaching the target, and the continuation of the dynamics will negatively affect the economy. In the accompanying statement, officials noted that they will consider further adjustments to the cost of borrowing if inflation continues to decline. In addition, since Canada is an oil exporter, the fall in WTI Crude Oil prices after reaching a high of 78.79 in early October to 68.95 also puts pressure on the national currency.

The American dollar is strengthening thanks to strong macroeconomic statistics. The October consumer expectations index from the University of Michigan was 74.1 points, although experts expected 72.9 points, and the consumer sentiment index was 70.5 points against 68.9 points. The September volume of core durable goods orders strengthened by 0.4% MoM compared to preliminary estimates of –0.1%. Thus, the economy is approaching a soft landing, supporting the asset.

Support and resistance

The long-term trend remains upward: the price reached the resistance level of 1.3885. After a breakout, the growth will continue to 1.3960 and 1.4100. If the 1.3885 mark is held, a correction to the 1.3735 area may follow where long positions are relevant.

The medium-term trend is also upward: the quotes have overcome zone 2 (1.3848–1.3827) and are heading towards zone 3 (1.4094–1.4071). In case of a correction to the support area of ​​1.3668–1.3646, it is worth opening long positions, with the target at the current week’s high of 1.3905.

Resistance levels: 1.3885, 1.3960, 1.4100.

Support levels: 1.3735, 1.3615, 1.3438.

Trading tips

Long positions may be opened from the 1.3735 level, with the target at 1.3885 and stop loss 1.3685. Implementation period: 9–12 days.

Short positions may be opened below 1.3685, with the target at 1.3440 and stop loss 1.3785.