USD/CAD slips below 1.3350 with eyes on BOC

USD/CAD declines 0.17% to 1.3348 amid the initial trading hours on Wednesday. While increasing odds of the BOC’s rate cut, following the Fed’s shock announcement, favored the pair on Tuesday, the latest recovery in WTI and risk reset in Asia seem to have exerted downside pressure. The Loonie traders will pay close attention to today’s BOC meeting amid global drives to tame the side effects of the coronavirus (COVID-19).

While Canadian economics haven’t been impressive following upbeat comments from the BOC’s Poloz, the latest surprise 0.50% rate cut from the US Federal Reserve is likely the key driver to push investors towards expecting a rate cut after today’s BOC meeting.

“In Canada's case, markets have now fully priced in a rate cut for March, and with recent developments, we believe that the cost of disappointing the market would be unpalatably high for the BoC. Although their preference may be to wait until they have a full forecast in hand to act, we now believe that the BoC will cut rates by 25 bps at tomorrow's meeting,” said TD Securities in this regard.

Also favoring the pair’s pullback is oil’s recovery as well as the positive performance of Asian equities. By the time of writing, the WTI pierces $48.00 with more than 1.0% gains whereas stocks in Asia are also mostly positive. The US 10-year treasury yields seesaw near 0.984%, down three basis points following its earlier drop to the record low of 0.901%.

Other than the BOC, for which overall consensus is of no rate change, the US ISM Non-Manufacturing PMI as well as coronavirus (COVID-19) headlines will also be the keys to follow.

Technical Analysis

Sellers will wait for the pair’s sustained declines below 1.3315 to take aim at the ascending trend line since January 07, 2020, at 1.3260 now. Alternatively, 1.3380, 1.3400 and 1.3430 question the pair’s short-term advances.