USDCAD Tests Key Resistance Ahead of Looming Rate Cut 
Burc Oran
October 22, 2024

USDCAD is pushing towards key resistance ahead of the expected rate cut from the Bank of Canada. Rapidly retreating inflation is pressuring the BOC (Bank of Canada) to lower rates into more neutral territory. While the BOC may need to act quickly, the Fed is expected to proceed with more gradual rate cuts, as recent economic data shows the U.S. labor market remains strong. This dynamic is giving a positive push to USDCAD. 

Now, USDCAD traders are asking two key questions. The first is: how fast will the Bank of Canada cut rates? Expectations for this week’s BOC rate decision are a 50-basis-point cut, with four additional 25-basis-point cuts anticipated by the end of the first half of 2025. 

(USDCAD Pushing for the Key Resistance) 

©Bloomberg 

The second question is: will USDCAD break out of key resistance? The 1.3850–1.3950 zone has been holding back advances for the currency since mid-2024, nearly two and a half years. However, the lows have been rising, forming an ascending triangle. Ascending triangles tend to break upwards, and this long-standing resistance has accumulated significant pressure. If a breakout occurs, it could push USDCAD towards 1.50 in the medium term, depending on economic developments. 

At both the bottoms and tops within the ascending triangle, nearly all have been marked by uneven double tops or bottoms, or by large spiked daily candles. In either case, strong short-term support (at the tops) and resistance (at the bottoms) formed and then broke. So, if USDCAD reverses without a breakout, these patterns might give traders an early signal. 

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