USD/CAD Recovers Following Dovish Comments From Poloz

USD/CAD declined sharply following the BoC rate statement and policy report, reaching a low of 1.3006, but recovered higher following the press conferences as Poloz discussed further easing. USD/CAD recovered over 100 points during his speech to erase earlier losses, remaining relatively unchanged on the day.

The Bank of Canada left interest rates unchanged today but there the speech by Poloz indicated that it was a close call. Poloz stated that the central bank had actively discussed adding more stimulus at the meeting, but deterred from doing so as there remain a number of uncertainties. With recent measure implemented to cool the housing markets, deferring the decision will allow the bank to see the impacts of their efforts. Also weighing on their decision was the upcoming US election. The Governor’s comments indicate that the bank is certainly open to easing policy further, causing a sharp push higher in USD/CAD.

The US Dollar index remains relatively unchanged today. The index dropped lower in early North American trading but has managed to recover back towards highs. A declining trendline drawn from Tuesday’s highs to the highs posted ahead of the European open today has held DXY lower, as seen on an hourly chart.

Oil prices moved higher today after an unexpected drop in oil inventories. The Energy Information Administration (EIA) reported a draw of 5.2 million barrels against an expected build of 2.2 million barrels. WTI crude oil pushed above June highs to trade at fresh highs for the year. USOIL was last seen at $51.76 for a gain of 1.99%.

The daily chart for USD/CAD is on track to post a large doji candlestick formation if a daily close is seen near current levels. The pattern is likely to draw buyers, while dovish comments by Poloz will add to the bullish sentiment. On an hourly chart, the pair is seen contained with a declining channel. A bullish break of the channel would provide further confirmation that a broader bullish turn is taking place. The first level of resistance is seen at 1.3142 referencing May highs. The level was most recently in play on October 10, triggering a sharp turn higher. A break above the level would provide additional confirmation of a broader turn higher.

USD/CAD 1-Hour Chart

USDCAD 1H Oct 18

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.