Unconventional Policies and the CAD

December 9, 2015

Unconventional Policies and the CAD:
While Speaking at the Empire Club of Canada in Toronto, Bank of Canada Governor Poloz delivered the alternate idea that BOC policymakers still have the fire-power to spur growth even with interest rates currently at near zero levels.

As concern for Canada’s economy grows within the global oil glut currently dampening the outlook for commodity-producing nations such as itself, the BOC has available what Poloz called ‘unconventional policies’, opening up the idea that negative rates and fiscal stimulus are at least being considered. While not expected to be implemented in the near term, charging banks for deposits, forward guidance and asset purchases were also all mentioned as possibilities.

Read the full update of framework for unconventional monetary policy measures from the Bank of Canada here.

USD/CAD Daily:
151209_usdcad_daily
Click on chart to see a larger view.

Taking a look at the daily chart, we can see that price has broken out of what is more or less an ascending triangle pattern. In this pattern, sellers are soaked up with each higher low, essentially until there are none left and this is why you get the exaggerated breakout to the upside.

With yesterday’s oil rout hammering the Canadian Dollar even before this morning’s comments from Poloz, the question becomes has the pair gotten too vertical on token comments that maybe should have been taken more with a pinch of salt?

USD/CAD 4 Hour:
151209_usdcad_4hourly
Click on chart to see a larger view.

Our TradingView chart shows one possible play, with a trackable before and after which is great for trading accountability. If you haven’t taken a look at TradingView yet, I cant recommend the site enough!

The Bank of Canada’s Twitter account is close to the best run Central Bank account online and this little infographic with quotes, highlights why markets probably don’t need to get too carried away on the ‘unconventional’ headlines just yet.

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Featured on the Forex Calendar Wednesday:
CNY CPI y/y
CNY PPI y/y

USD Crude Oil Inventories

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Chart of the Day:
If you’ve been following the Vantage FX blog, then you will have seen the AUD/JPY chart of the day that we featured a few weeks ago.

“Zooming out to the daily and we can see that price smashed through the 100 SMA that we were watching last week, and looks like it is reaching for channel resistance. I have re-drawn the horizontal support/resistance line to take in the spikes and we now have a nice confluence of possible resistance from which to take trades from.”

AUD/JPY Daily:
151209_audjpy_daily
Click on chart to see a larger view.

A clean rejection off channel resistance sees price now testing short term support. Was this bullish move just a counter-trend, flag pattern?

Do you see opportunity trading AUD/JPY?

Dane Williams – @VantageFX

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