USDCAD has not been much of a mover lately, however that may be about to change given the upcoming Bank of Canada rate statement that is scheduled for September 9th at 10am EST.
Since breaking above channel resistance on July 15th, the pair has maintained a fairly tight range of higher highs and higher lows.
One thing that does concern me is that we have yet to see a healthy correction since mid July. That said, if we use the period between July 2014 and January 2015 as a reference, we can see that USDCAD can trend higher for quite some time without a significant pullback.
Like any trade idea, we need to have a well-defined level that will act as a trigger. In this case that level is wedge resistance that extends off of the August 25th high. This level was reconfirmed during yesterday’s session when the pair failed to break through it for a third time since late August.
From here we can watch for a 4 hour close above resistance, which could be enough to push USDCAD to 1.3470 and possibly higher. On the flip side, a close below wedge support would negate the bullish bias and turn our attention lower.
Of the two scenarios, only a break of resistance would pique my interest. This is because of the bullish trend that has been in place since mid May. Anything other than a buy would be counter-trend and not something I want to pursue at this time.
Although the Bank of Canada is expected to hold rates steady, the volatile market conditions of late have taught us that breakouts can occur at any time and without much warning, so be sure to keep this one at the top of your watch list.
Summary: Watch for a buying opportunity on a 4 hour close above wedge resistance. The 133.50 level will likely attract sellers, however the three key resistance levels to keep an eye on beyond that are 1.3470, 1.3700 and 1.40. Alternatively, a break below wedge support would negate the bullish bias and turn our attention lower.