The Bank of Canada will release their Overnight Rate, Monetary Policy Report and Rate Statement today at 10:00 am New York time. The consensus is that they will bump their overnight rate up from 1.25% to 1.5%. Then at 11:15am the Bank of Canada will hold a Press Conference. However, historically the most movement in the USDCAD will occur immediately after the rate statement. Measuring the historical moves from 2009 to 2017, the average for July from high to low from 10:00 to 10:15 am (immediately post announcement) has been an average of 42 pips. Over the course of the last three years for the month of July, the move (again measured from high to low for 10 am to 10:15 am) the move has been:
- July 2015, 137 pips
- July 2016, 112 pips
- July 2017, 92 pips
Additionally, the last rate hike, which was on January 17, 2018, resulted in a 164 pip move from 10:00 to 10:15 am.
Currently the daily chart has formed a congestion dot and, after testing the congestion dot, price is now retracing back up to the ATR (red plus sign on the chart). Additionally, as mentioned on the TFNN Bull/Bear Binary Option Hour with Tom and Tommy O'Brien yesterday, hidden divergence (tan lines on the chart below) formed as price tested the congestion dot. Does this mean that price will go up today after the announcement? Not necessarily. The white circle highlights the resistance area that could push price back down and would mimic the action seen after the last rate hike when price initially moved up from 10 to 10:15am and then moved back down to test the low that formed immediately after the rate announcement.
Looking at the 60 minute chart, price is currently moving upwards off the blue ATR, which was anticipated because of the hidden divergence formation from yesterday. The blue line marks where price is likely to go, either immediately prior to the rate announcement or immediately thereafter. However, with a daily ATR at that level, more likely than not, it will serve as resistance. Plus, the yellow lines indicate additional historical resistance levels. Additionally, with the Stochastics approaching the Stochastics 80 level, which likely indicates the market to be overbought, a retracement will likely occur. Analyzing the buying volume on the 60-minute chart also shows that buyers have started to decrease on the highs, as well.
Of course, with a rate announcement anything can happen, which is why trading binary options during market reports is advantageous because traders can limit their risk on entry instead of using stops. Nadex provides a free demo account and you can open yours today by simply clicking here.