| Scenario | |
|---|---|
| Timeframe | Weekly |
| Recommendation | SELL STOP |
| Entry Point | 1.3500 |
| Take Profit | 1.3427, 1.3305 |
| Stop Loss | 1.3550 |
| Key Levels | 1.3305, 1.3427, 1.3671, 1.3793, 1.3916 |
| Alternative scenario | |
|---|---|
| Recommendation | BUY STOP |
| Entry Point | 1.3675 |
| Take Profit | 1.3793, 1.3916 |
| Stop Loss | 1.3580 |
| Key Levels | 1.3305, 1.3427, 1.3671, 1.3793, 1.3916 |
Current trend
Last week, the USD/CAD pair resumed its downward movement and is trading around 1.3510. The American currency is losing ground amid the US Fed’s decision to adjust the interest rate by –50 basis points to 5.00%, starting a cycle of easing monetary policy. According to experts polled by Reuters, the regulator will cut the indicator by 25 basis points twice more before the end of the year, in November and December, and next year, it may decrease by a total of another 100 basis points, as a result of which the national currency will be under significant pressure in the long term.
The Bank of Canada’s monetary policy steps may support the asset’s quotes: in August, the annualized consumer price index reached the target level of 2.0% while the growth of gross domestic product (GDP) remains relatively poor. So, experts assume that the next month, the regulator will be able to change the cost of borrowing by –50 basis points to 3.75%. These sentiments are supported by the comments of the head of the department, Tiff Macklem, who stated the need to prevent inflation from falling below the target levels.
In general, further downward movement of the USD/CAD pair soon remains most likely.
Support and resistance
The trading instrument has consolidated below 1.3549 (the middle line of Bollinger Bands, the Murrey level [–1/8]), which will allow it to reach the area of 1.3427 (the Murrey level [–2/8]) and 1.3305 (the Murrey level [1/8], W1). In the case of a breakout of 1.3671 (Murrey level [0/8]), the growth of the quotes will resume around 1.3793 (Murrey level [1/8]) and 1.3916 (Murrey level [2/8]).
Technical indicators allow for a continuation of the decline: Bollinger bands are horizontal, Stochastic is directed downwards, and the MACD histogram is increasing in the negative zone.
Resistance levels: 1.3671, 1.3793, 1.3916.
Support levels: 1.3427, 1.3305.
Trading tips
Short positions may be opened from 1.3500, with the targets of 1.3427, 1.3305, and stop loss of 1.3550. Implementation period: 5–7 days.
Long positions may be opened above 1.3671, with the targets at 1.3793, 1.3916, and stop loss 1.3580.
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