Lest anyone think that the Bank of Canada may be easing given comments from BoC’s Wilkins earlier this week, BoC Governor Poloz made it very clear on Thursday that he feels the Bank has monetary conditions “about right”. He also said he feels that global conditions have eased quite a bit. These comments were viewed as hawkish by the markets. Wilken’s comments on Tuesday were taken by the market as dovish, given that she mentioned the BoC has room to maneuver and has other “tools” the bank can use, such as forward guidance. Wilkins is considered a front runner to take the head position when Poloz’s term ends in mid-2020.
As Poloz was speaking, USD/CAD came under pressure and traded down 45 pips from 1.3325, down to 1.3270.
Source: Tradingview, FOREX.com
USD/CAD wasn’t the only pair to sell off on the Poloz comments. EUR/CAD fell 70 pips from 1.4470, down to 1.4700. In addition, GBP/CAD sold off over 100 pips from 1.7270 to 1.7162.
However, as I have noted, USD/CAD has been confined to the apex of the symmetrical triangle dating back to early 2016 between 1.3150 and 1.3400.
Source: Tradingview, FOREX.com
What will be the catalyst to push price out of the triangle? Two immediate items come to mind. The first is Canadian retail sales, which are to be released on Friday. Headline expectations (MoM) are for sales to have risen 0.2% in September after falling -0.1% in August. However more importantly, retail sales ex-autos (MoM) are expected to have risen 0.3% in September after falling -0.2% in August. If these figures are much better or much worse than expected, it may be enough to drive price out of the range.
The second item, and the more likely event to move USD/CAD, is the ratification of the United State – Mexico- Canada Agreement (USMCA). Speaker of the U.S. House of Representatives Nancy Pelosi has indicated that she is hopeful the Democrats and Republicans can get issues resolved as early as Thursday. The sticking point is that Democrats want stronger enforcement mechanisms in the pact. The passage of the USMCA would be good news for both the Canadian dollar and Mexican peso and both may go bid.
If the USMCA gets passed sometime soon and the Bank of Canada is hawkish moving forward, then these may help act as a catalyst to push USD/CAD out of the apex of the long-term symmetrical triangle