The price trades between the 100 and 200 hour MA. Tension in the air for a fight between buyers and sellers.

The BOC decision is at 10 AM ET/1400 GMT and all the scenarios are open:

  • no change,
  • 25 bp hike.
  • No change with indication of a hikes to start at next meeting (hawkish comments),
  • hike with dovish hike comments,
  • hike with less dovish hike comments.

Risk is increased. Moreover, the volatility risk (up and down or down and up) price action is a very good possibility. I smell a bar room brawl between the buyers and the sellers honesty. Not only are there a lot of possibilities but there is also a lot of time from the statement to the press conference where traders fear, anxiety, interpretation and uncertainty can cause up and down price action. So be aware.

Technically, the pair is trading between the 200 hour above at 1.29445 (a trend line cuts across at that level too), and the 100 hour MA below at 1.2917. Given that the pair is near the lowest level going back to September 2016, a move above the 1.2944 level would be a more bullish play from these levels . The price has not traded above the 200 hour MA since June 27th. A move above has other upside targets at 1.2968 and then 1.30135. The 1.30135 was home to highs from last weeks trading. It is a ceiling that if broken should lead to more upside. A move above that will then target 1.3046 (38.2% of the move down from the June 21 high).

On the downside, the low from last week at 1.2860 is the big step lower for the pair. Get below is obviously more bearish. The lower trend line (see red circles) on the hourly chart will target the 1.2820 area (not shown but believe me).

If you look at the daily chart below, the 1.28207 level is also important from that longer term perspective. It represents the low from September 9th 2016. So the level is important on the hourly and the daily chart. Be aware. A break and run below that will look toward the August 2016 low at 1.27617.

Expect a lot of volatility at 10 AM ET/1400 GMT and going forward. I am reluctant to get involved in a bar room brawl and suggest the same (there is already a brawl going on in the EURUSD off the Yellen testimony notes and anticipation of what she will say starting at 10 AM ET).

Remember the BOC decision is at 10 AM but (like Yellen) the press conference is not until much later at 11:15 AM ET/1515 GMT. That is a lot of time for traders to go one way and get scared and go the other way (or flows to whip around). So if you must, use the levels as the roadmap. Don't be afraid to take profits (or cut losses quickly). Be patient.

I feel tension in the air and expect a fight to break out soon (like at 10 AM ET). Anything (good and bad) can happen in a bar room brawl and this decision has lots of possibilities.