USD/CAD on the offers around 1.2450, eyes on BOC

The USD/CAD pair extends its losing streak into a third day today, as a beleaguered US dollar combined with surging oil prices continue to keep the rates near 3-day troughs near 1.2440.

USD/CAD: Eyes on BOC verdict.

The spot remains suppressed and looks to test the 1.24 handle amid persistent weakness seen in around the US dollar across its major peers, as markets now believe that the Fed isn’t the only central bank to go for higher interest rates this year. The USD index drops -0.10% to 90.53, recovering slightly from three-year lows of 90.39.

On the CAD-side of the story, the prolonged rally in oil prices continues to keep the sentiment buoyed around the resource-linked Loonie, adding to the weight on the CAD pair. Meanwhile, better Canadian fundamentals back the case for a rate hike, when the Bank of Canada (BOC) meets to decide on its monetary policy this Wednesday.

“We expect the BoC to raise the overnight rate by 25bp at Wednesday's meeting. Clear signs of diminished labor market slack and an economy operating at full capacity should outweigh rising trade tensions with the US. Risks around a possible US withdrawal from NAFTA will likely once again be the biggest concern weighing on the BoC, but absent an imminent withdrawal notice, they should feel comfortable bumping up the overnight rate to its post-crisis high of 1.25%,” the RBC Capital Markets Research Team noted.

In the meantime, the USD price-action and broader market sentiment will play the main drivers amid holiday-thinned light trading ahead.

USD/CAD Technical View

The immediate support for the pair aligns at 1.2437 (daily low) ahead of 1.2400 (natural support) and 1.2377 (Jan 8 low). On the upside, resistances could be seen at 1.2469 (daily top), 1.2487 (5-DMA) and 1.2500 (round figure).