What are the charts saying?
Bank of Canada's Poloz said the recent rate cut buys the central bank some time to see how economy responds to effects of oil shock. The price of the USDCAD tumbled on the expectation that the BOC was content to stay the course for the time being
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That move to the downside, has seen the price move through the 100 hour MA, and the 38.2-50% retracement levels (see chart above). Earlier in the day, the price of the USDCAD found support against the 38.2% retracement level (at 1.25475 - see yellow area in the chart above). Breaking below it, will now solidify that level as a risk defining level. Closer resistance comes against the 100 hour moving average. That level is currently at 1.25274.
Looking at the 5 minute chart below, the 38.2 to 50% retracement of the trend like move lower comes in at the 1.25309 to 1.25473. When the market price trends lower in a fast, directional move, I look for any retracements to stay below this "correction zone" (yellow area in chart below). The reason is that sellers were happy to push the market quickly to the downside. They should be equally as happy to sell at a level 38 to 50 percent higher. If not, those sellers are not too committed to the trend move.
With the 50% level on the 5 minute chart equal to the 38.2% level on the daily chart (both are at 1.2647), it helps to solidify that level as a key risk defining level. Any correction, should stay below that level going forward. If it does not, get out.
On the downside, the market does have some further work to do in order to open up the downside. The 61.8% retracement of the hourly chart is currently holding the downside. In addition to that there is trend line support at 1.2466. Below that the 1..2409 level was home to a number of swing lows ( see green circled numbers). However, if those levels can be taken out, the downside will open up for the pair.
