USDCAD Analysis Prior to Wednesday’s Rate Announcement
When trading major market events, it is important to analyze the higher timeframes to potentially see where the institutional money is aligning — to the upside or to the downside. While the USDCAD typically will move opposite of Crude after the Crude inventory report, which makes the USDCAD a great secondary trade for trading the Crude reports, as I mentioned Monday, the Bank of Canada rate announcement will dominant the currency this week.
The chart below shows the USDCAD 360 minute (on top) and daily (on bottom). The 360 minute has formed several trend divergences (yellow lines). However, the last time price retraced up to the ATR, hidden divergence formed (red lines) and price continued down to make a new low.
The retracement to the ATR on the 360 minute will be critical for analyzing the upcoming move. If the ATR holds and hidden divergence forms again, then price will either make a new low or fail to break the previous low. If price fails to make a new low, an upward move will likely occur immediately after the rate announcement.
If a new low is made on the daily chart today, then reading the stochastics on the daily will provide the clues for tomorrow’s rate announcement. If the stochastics goes lower than the previous low, another down move will be anticipated. However, with the stochastics moving up at the moment, after a period of being oversold, it is very likely that trend divergence will occur providing a retracement to the ATR on the daily timeframe.