JWagnerFXTrader

Loonie Sentiment Neutralizes Ahead of BOC Rate Announcement

FX:USDCAD   U.S. Dollar/Canadian Dollar
470 3 7
Wednesday morning (in about 10 hours) we have the Bank of Canada releasing their latest monetary statement. Economists are widely expecting the BOC             to hold rates at 50 bp             . However, there is some speculation that the recent weakness in oil             prices may be a reason to drop rates and leave open the door for negative rates into the future in an effort to help the Canadian oil             producers.

I won't claim to know what the BOC             will do. However, looking at the chart...there is some technical levels coming into play as we enter this news release.

78.6% of the 2002-2007 downtrend comes in near 1.4650
4.236 extension of the July 2011 to October 2011 up trend comes in near 1.4575

Couple those levels with a retail sentiment reading ( SSI             ) that is increasing due to shorts closing out their positions opens the door for a reaction to take place near current levels.

I will be watching retail sentiment live HERE and if the reading continues to increase may suggest a correction lower is coming. Ultimately, I am looking for a correction lower to buy a dip.

Naturally, oil             prices play a large part in driving the value of the CAD. My colleague Tyler Yell has a Q1 Oil             Forecast available with a free registration HERE. Since Canada is a heavy oil             producer AND since the Mexican Peso is weakening substantially (Mexico is also a large oil             producer), oil             is coming in cheaper from Mexico which is also dragging on the CAD. So Canada is getting hit from a couple of different angles.

Good luck and happy trading!
Comment: Though we saw evidence of a turn coming expressed through the cluster of measured moves and SSI, the move has been a bit dramatic.

1.3760-1.3980 is the price zone that the market begins to tip its hand if this was an outright reversal or if there is still bullish juice left in the tank. If prices respect this zone and try to bounce higher, that keeps the door open for another test at the high.

If prices pierce the zone without hesitating, then this is a bigger reversal. 1.3450 is the price level where upon breaking, we'll need to re-inspect the longer term charts.

The sentiment reading has blasted higher to -1.6 which suggests there is more room to run to the downside.

snapshot
Comment: USDCAD FXCMSentiment continues to shift towards longs...it has increased from -1.6 in the past update to -1.37. Keep an eye on 1.3750-1.3975 as a zone to see how price and FXCMSentiment behaves. Signs of support would suggest bullish juices still in the tank. Slicing through this zone suggests a top is in.
Comment: Oops - here's the chart with the current SSI reading.

snapshot
Thank you mate for sharing & Good luck to you as well :)
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Thanks for sharing .. Keep it up
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Very good Analysis Jeremy. Thanks for your very professional works. Hour confusion on my part at BoC announcement cost me some money recently. I usually never trade during Rate announcements and I was late to react due to confusion. Another lesson learned - be more serious about rate calendar. However, I was right to expect a downfall of USD against CAD and liquidated all USD holdings just before the slump. I expect a ride down to 1.38-1.39 levels as well. As you said there is still some way to go. Agree with you yet again.
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