USDCAD Overnight Range 1.2971-1.3110              

The Bank of Canada downgraded their 2016 and 2017 growth forecasts and FX traders downgraded the Loonie.USDCAD drifted up throughout the early New York session and then exploded higher when the interest rate statement was released. Oh, and interest rates were left unchanged. Uncertainty about China and lower commodity prices, including oil were blamed for the downgrades.

The downgraded forecasts were not unexpected nor were the concerns about China.  In fact, China has been the scape-goat in bank statements around the world, including the FOMC, RBA, RBNZ and the ECB, so for the BoC, it was a lay-up.

Unfortunately, for Canadian dollar bulls, buying USDCAD was a lay-up as well.  The statement highlighted current and future economic risks in an environment where oil prices are soft, China equities were very soft and Canada has a new government. USDCAD bulls drove the currency pair above resistance in the 1.3050-70 area where it touched 1.3110 before some profit taking occurred.

Adding to the uncertainty was the fact that many Canadians are still shaking their heads in disbelief about Monday’s election result.  The 1985 “Back to the Future” movie is all over the news and Trudeau is Prime Minister, just as it was 30 years ago. If Marty McFly walks into the room, they are going to die.

There was nothing “Back to the Future-ish” in Asia markets. They were quiet even as Chinese equity prices dropped the most in a month. That wasn’t the case in Europe. Traders there noted the weak China equities and pounded on Kiwi and Aussie.EURUSD tried to break above 1.1400 but failed below 1.1380.  Sterling traded sideways, awaiting Mark Carney’s take on the financial implications of the UK leaving the EU.

USDCAD technical outlook

The intraday technicals are bullish.  The uptrend from last Thursday’s 1.2835 low remains intact while trading above 1.2970.  In addition, the break of the 1.3050-70 resistance area suggests that 1.2835 is a short term bottom.  The focus shifts to 1.3150 and then 1.3220. A move below 1.2970 would suggest further 1.2835 1.3150 consolidation.  For the day, USDCAD support is at 1.3070, 1.3040 and 1.3010.  Resistance is at 1.3120 and 1.3150

Todays forecast range 1.3070-1.3150

Chart USDCAD 4 hour with Fibonacci retracement targets