As a result of growth that has been taking place since May 2011 pair has reached level of 1.4100 converging precisely with 70.7% of the Fibonacci correction from earlier declines, where in January last year  bearish reaction occurred. For three consecutive months we have seen very dynamic declines, but since May last year bulls took the initiative, although growth is definitely less dynamic.

USDCAD Monthly

Looking at weekly chart, we will notice that as a result of the mid-May declines, market has reached support of growth channel. Taking into account that the upswing that has lasted more than a year is much more like a correction than a strong impulse, overcoming current support could open way for further declines in longer term.


On daily chart we see that potential drops could even reach levels around 1.1950, although we would have to break on the way some slightly less important levels of support first.

It is also worth recalling important macroeconomic publications scheduled for today, which may cause greater volatility and possible rejection or defeat of currently tested support. We need to watch events – 16:30 weekly readings on oil stocks on the local market and scheduled for 20:00 FOMC decision on interest rates.

For the first of these publications, market consensus assumes that after last week’s increase of €3,295 million crude oil inventories shrank by 2.739 million brk. If the actual reading coincides with forecasts, we could expect strengthening of Canadian dollar and, consequently, a deeper decline in USDCAD.

In the case of FOMC decisions markets expect rate hike of 0.25% to 1.25%. From technical point of view, this situation should strongly influence appreciation of US dollar which has been weakening for a long time, but it is worth recalling how markets reacted to the December rally when we observed a strong depreciation of the USD. All this really depends not only just on the scale of rate hike but from the scheduled hour 20:30 press conference of FOMC and general (dovish or hawkish) tone of speech of Fed Chairman, Janet Yellen.

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On H4 chart, we will note that market is currently testing bullish trend line and a significant support zone. Taking into account that due to Monday’s falls, we broken bottom of the previous consolidation, its lower limit has not yet been tested from below (as a resistance), technically we would expect a demand response and at least bullish correction in the near term.


On the M15 chart we will see how precisely market tests the bottom limit of the growth channel. Waiting for trend change signal, we would have to wait until (pink) resistance zone is broken.

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