BOC decision tomorrow at 10 AM ET. No change expected. BoA/Merrill see USDCAD at 1.3600 by year end

In an earlier post, BoA/Merrill Lynch speak of how they see the USDCAD moving higher into the year end and into 2017. Their call is for the USDCAD to reach 1.3600 by the year end. With the price at 1.32623 that is 338 pips from here. There are 18 trading days and included in that period is not only the BoC no change tomorrow but also;

  • Non OPEC meeting on Dec 10th
  • Fed Meeting on December 14th and
  • A Christmas to New Year holiday which will likely have traders taking Friday Dec 23rd off as well.

So if 1.3600 is the target, it better get going tomorrow.

What does the technical picture look like?

Looking at the daily chart above,

  • the pair today has an inside day but a higher close (we need to close today above 1.3270). That is a more bullish signal.
  • The low yesterday fell below the low from November at 1.3262, but it ended up closing above that low. Are buyers entering? Maybe.
  • Today the price fell below that November low again at 1.3262, but once again, we are higher today.
  • The area between 1.3246-82 is an area where there were a number of swing lows and highs going back to July. Yesterday, the price fell below the level but quickly rebounded.

So let's just say that buyers are entering. Going forward, stay above 1.3262 to 1.3270 is the best case scenario. If the price goes below the 1.3246, and then the upward sloping trend line currently at 1.3212 and the 100 day MA at 1.3188, and the picture turns decidedly more bearish for the pair. As of this moment though the buyers are trying to hold support.

Looking at the hourly chart, with the move lower over the last few weeks, there are plenty of hurdles above that stand in the way (see Red numbered circles). What targets are of importance?

  1. 1.3321: 100 hour MA
  2. Trend line at 1.3344
  3. Low from November 30 and high on Dec 5th at 1.3454
  4. 38.2% retracement at 1.3369
  5. 200 hour MA at 1.3389 (and moving lower)
  6. 50% at 1.34106
  7. 61.8% at 1.34519
  8. Trend line at 1.3477
  9. From there the highs near the November highs at 1.3521
  10. High from November 18 at 1.3563
  11. November high at 1.3586

When the price is taking back levels in the opposite direction of the most recent move, there are going to be hurdles. Each of those hurdles can stall the rally - especially the 200 hour MA and the 50% retracement.

The move to 1.3600 in normal times would be a challenge.

  • With it being year end,
  • With the Fed largely expected.
  • With Non OPEC getting together to talk cuts in production (CAD supportive potentially),
  • With lots of hurdles to get to and through

To get to 1.3600 would need everything to go right and tomorrow would be the first step. If the no change decision and statement tomorrow does not start to take out some of the early hurdles, it will be tough sledding. So watch that 100 hour MA. Getting above that is step #1.

The good news is from the daily, it may be building a bottom. The question is, "Can it gather the upward momentum without any big setbacks? "