- USD/CAD seesawed around 1.3342-1.3417, ahead of the Bank of Canada monetary policy decision.
- Analysts expect the BoC to raise rates by 25 bps and to pause.
- The BoC would release monetary policy minutes for the first time in its history.
The USD/CAD erases some of its earlier losses, climbs toward the 1.3370 region after briefly touching its daily low of 1.3342, ahead of a crucial week for the Canadian Dollar (CAD), with the Bank of Canada (BoC) setting rates for the first time in 2023. In addition, a late US Dollar (USD) bid keeps the USD/CAD from breaking to test the 200-day EMA. The USD/CAD is trading at 1.3375.
USD/CAD is almost unchanged ahead of the Bank of Canada's meeting
Traders mood remains upbeat amid the lack of Fed speakers due to the blackout period, ahead of the first Federal Reserve (Fed) meeting in 2023. The Canadian economic docket featured housing data, with the New Housing Price Index MoM edging to 0%, above estimates for a 0.2% contraction, while YoY eased from 4.1% to 3.9%. The Conference Board (CB) Leading Index in the US dropped to -1%, beneath the -0.7% estimates.
“The US LEI fell sharply again in December - continuing to signal recession for the US economy in the near term,” Ataman Ozyildirim, the Conference Board’s senior director for economics, said in a statement.
Aside from this, the BoC monetary policy decision on Wednesday could keep the USD/CAD pair subdued. Analysts expect a 25 bps rate hike, to 4.50%, with a good portion of them estimating that the BoC would pause.
TD Securities Analysts estimate the BoC would hike rates by 25 bps, adding, “We expect this to be the final move in the BoC’s tightening cycle, while markets are only pricing a small probability (20%) of further hikes.” It should be said that for the first time, the Bank of Canada would release monetary policy minutes, which according to analysts, “will help restore credibility lost last year amid soaring inflation and encourage out-of-the-box thinking,” according to Reuters.
USD/CAD Technical Analysis
Therefore, the USD/CAD would likely remain subdued around the 1.3316-1.3424 area, which sits the 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) is almost flat at bearish territory, suggesting that sellers remain on the sidelines, bracing for the BoC’s decision, while the Rate of Change (RoC) suggests bears are stepping in. If the USD/CAD holds below 1.3400, that would pave the way for further downside. Key support lies at 1.3300, followed by the 200-day EMA at 1.3249.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD consolidates below 1.0850 amid upbeat mood

EUR/USD is easing below 1.0850 in the early European morning. Traders turn cautious, despite easing banking fears, as the focus shifts toward the euro area inflation data. The pair's pullback could be also attributed to a broad US Dollar rebound.
GBP/USD turns south toward 1.2300 as US Dollar rebounds

GBP/USD is heading back toward 1.2300, fading the Asian bounce in early Europe. Broad-based US Dollar rebound, despite a better market mood and sluggish US Treasury bond yields, is weighing on the pair. US housing data awaited.
Gold declines towards $1960 as USD rebounds ahead of Core PCE Price Index

Gold price is declining towards $1960.00 as investors are getting anxious ahead of US PCE inflation data. The reputation of Gold as a safe-haven amid US banking jitters has ebbed. On a broader note, Gold price is auctioning in a Symmetrical Triangle chart pattern.
Ethereum supply shrinks by 70,000 ETH. Will Ethereum price hit $2,000?

Ethereum transition from Proof-of-Work to Proof-of-Stake was the last major upgrade to the altcoin’s blockchain and the Shanghai hard fork is the next one. The shift to PoS purged 70,000 ETH tokens from the altcoin’s circulating supply.
Market mood improves as banking fears ease

This week, financial markets will focus on key inflation figures from across the globe, speeches by Fed officials, and the US Senate hearings on SVB. Although some normality seems to be returning to markets, this could easily be disrupted by negative news.