USD/CAD Ahead of Bank of Canada Rate Decision

USD/CAD Ahead of Bank of Canada Rate Decision

USD/CAD Ahead of Bank of Canada Rate Decision

Fundamentals

The next major central bank announcement will be from Canada, which is why USD/CAD is in play for the next 24 hours. On the eve of the rate announcement, the currency pair hovers not far from its 5 year high. Two months ago, the BoC dropped the word neutral from their monetary policy statement, fueling bets that they are more open to the idea of raising interest rates. However there is very little chance that Canada will raise rates before the U.S. and the Federal Reserve is not slated to tighten until the middle of next year at the earliest. While the labor market has seen dramatic improvements leading to a pickup in retail sales and inflation is on the rise, manufacturing and trade activity along with Q3 GDP growth fell short of expectations. Oil prices also dropped more than 17% since the last monetary policy meeting. Therefore we don’t expect any renewed optimism from the BoC and if instead they express concerns about the volatility of oil, USD/CAD could test its 5 year high of 1.1467.

Technicals

Taking a look at the monthly chart of USD/CAD if the currency pair breaks its current 5 year high of 1.1467, 1.15 will serve as near term resistance but 1.1540, the 38.2% Fibonacci retracement of the 2007 to 2009 rally will be the key level to watch. On the downside, 1.12 remains support for USD/CAD.

Chart Of The Day

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