- USD/CAD ticks higher amid an extension of the recent USD rally to a nearly three-month top.
- Bets for a larger BoC rate cut, softer Oil prices undermine the Loonie and also lend support.
- The technical setup favors bullish traders and supports prospects for further near-term gains.
The USD/CAD pair attracts some dip-buyers following the previous day's modest slide and sticks to its positive bias around the 1.3825 region through the first half of the European session on Wednesday. Spot prices remain within the striking distance of the highest level since August 6 touched earlier this week as traders keenly await the Bank of Canada (BoC) policy decision before positioning for the next leg of a directional move.
Heading into the key central bank event risk, the recent US Dollar (USD) upswing to its highest level since early August, led by bets for a less aggressive policy easing by the Federal Reserve (Fed), continues to act as a tailwind for the USD/CAD pair. Apart from this, a downtick in Crude Oil prices is seen undermining the commodity-linked Loonie and offering additional support to the currency pair amid expectations for a larger BoC rate cut later today.
From a technical perspective, this week's breakout and a daily close above the 1.3800 mark could be seen as a fresh trigger for bullish traders. This, along with the fact that oscillators on the daily chart are holding comfortably in positive territory, suggests that the path of least resistance for the USD/CAD pair is to the upside. That said, it will still be prudent to wait for a move beyond the monthly high, around the 1.3850 area, before positioning for further gains.
The subsequent move-up has the potential to lift spot prices beyond the 1.3875 intermediate hurdle, towards reclaiming the 1.3900 mark. The USD/CAD pair could eventually aim to challenge its highest level since October 2022, around the 1.3945 region touched last month.
On the flip side, the 1.3800 round figure could offer some support ahead of last week's swing low, around the 1.3750-1.3745 area. A convincing break below might prompt technical selling and drag the USD/CAD pair further below the 1.3700 mark, towards testing the 100-day Simple Moving Average (SMA), near the 1.3665 region. This is followed by the 200-day SMA, around the 1.3625 zone, which if broken might shift the bias in favor of bearish traders.
USD/CAD daily chart
Economic Indicator
BoC Interest Rate Decision
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Next release: Wed Oct 23, 2024 13:45
Frequency: Irregular
Consensus: 3.75%
Previous: 4.25%
Source: Bank of Canada
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 accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.