•USD/CAD to continue correcting higher over the next few weeks, especially if the FOMC appears somewhat optimistic tomorrow and keeps the prospect of a December rate hike on the table.
•The pair’s broader trend remains to the downside, amid elevated expectations for another BoC rate hike this year (75% according to Canada’s OIS) and strong Canadian economic data across the board.
•USD/CAD edged north yesterday, breaking above the resistance (now turned into support) barrier of 1.2231 to hit resistance at 1.2337.
•Although the rate continues to trade below the prior upside support line drawn from the low of the 26th of July, we see the case for the pair to continue its recovery for a while. A break above 1.2337 would confirm that and could set the stage for extensions towards our next resistance of 1.2430.
•As for the bigger picture, the price structure on the daily chart remains lower peaks and lower troughs below the downtrend line drawn from the peak of the 9th of June, which keeps the medium-term outlook negative. Any latest recovery or any extensions of price that stay limited below that trend line would treat as a corrective phase.