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USDCAD Has Closed the Gap: Where To Next?

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Watch out for the Bank Of Canada Interest Rate Decision and Statement - Wed 15 July, 14:00 GMT

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Over the weekend of the 6th of March to the 8th of March 2020, the USD/CAD gapped up over +128 pips, before rallying to the upside for the best part of two weeks. This gap was eventually filled on the 5th of June, which raises the question: where will the USD/CAD trade to next?

The Bank of Canada is due to release their interest rate decision this week which will likely give traders insight into USD/CAD direction. The current consensus is that the BoC will maintain the current interest rate at 0.25%, however any outcome for the interest rate will likely see an increase in volatility as traders adjust positions accordingly.

Technically, USD/CAD is moving in an uptrend, with the previous 3 days closing bullish. The pair has found daily support around 1.3485, however is still trading below the Daily 50 exponential moving average.

In Q2 we saw the USD/CAD form support around the 1.385 level, which was broken on the 26th of May, and retested as a resistance level on the 29th of May. If the BoC keep current interest rates or cut the rate this may give the USD/CAD a bullish boost to retest this level. Traders should also look out for the rate statement that accompanies the interest rate decision, for greater insight into the BoC’s decision.

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