USD/CAD Price Analysis: Approaches 1.3800 ahead of BoC policy

The USD/CAD pair holds onto gains prompted by a breakout of the consolidation formed in a range of 1.3665-1.3740 in the European session. The Loonie asset capitalizes on expectations that the Bank of Canada (BoC) will keep interest rates unchanged at 5% for the second time in a row.

In addition to expectations of a BoC pause, a strong recovery in the US Dollar after an uptick in the US business activities has infused strength in the Loonie asset. The US Dollar recovered strongly on Tuesday after S&P Global reported higher Manufacturing and Services PMI in October amid robust consumer spending despite higher interest rates by the Federal Reserve (Fed).

The oil price corrected significantly as investors hoped that the Israel-Hamas war could be contained. Various nations urge Israel to rethink the consequences of ground assault in Gaza, which could result in a deep shock for the global economy. It is worth noting that Canada is the leading exporter of oil to the United States and lower oil prices impact the Canadian Dollar.

USD/CAD hovers near the upper portion of the Rising Channel chart pattern on an hourly scale in an attempt for a breakout. The Loonie asset is approaching the horizontal resistance plotted from October 5 high at 1.3784. Upward-sloping 50-period Exponential Moving Average (EMA) at 1.3720 warrants more upside ahead.

 The Relative Strength Index (RSI) (14) shifts into the bullish range of 60.00-80.00, which indicates that the upside momentum has been triggered.

A decisive break above March 24 high around 1.3800 would expose the asset to March 10 high at 1.3860, followed by the round-level resistance at 1.3900.

In an alternate scenario, a breakdown below September 25 low around 1.3450 would drag the asset toward September 20 low near 1.3400. A further breakdown could expose the asset to six-week low near 1.3356.

USD/CAD hourly chart