USD/CAD Outlook Ahead of BoC Interest Rate Decision

Summary:

USD/CAD is trading lower ahed of the BoC interest rate decision later on Wednesday. The pair is also reacting to the US oil inventory data.

USD/CAD has reversed its prior gains ahead of the BoC interest rate decision. According to the Bank of America, the event scheduled for Wednesday afternoon may not push the Canadian dollar any higher. The bank has noted, “All else unchanged, we believe it will be difficult for this meeting to serve as a catalyst for further CAD strength, as turned out to be the case with the April meeting.”

In its April meeting, Canada’s central bank took a rather hawkish tone as it hinted to hiking interest rates from late 2022. This would also include tapering its asset purchases. Subsequently, USD/CAD dropped from 1.2654 to 1.2013 in mid-May. In today’s event, the bank is expected to leave rates unchanged at 0.25%. Besides, it may dial back on the optimism it showed in its previous meeting.

At the same time, the Canadian dollar is finding support in the easing of COVID-19 restrictions in Ontario. On Monday, Premier Doug Ford announced that the easing will begin on 11^th June, which is 3 days earlier than expected. The province will usher in step one of the reopening plan, which will last for 21 days. The pair will also be reacting to US oil inventory data.

USDCAD technical outlook

USD/CAD is down by 0.17% at 1.2091. On a two-hour chart, it is trading between the 25 and 50-day exponential moving averages. I expect the currency pair to continue finding resistance at 1.2100. On the flip side, it may decline to find support at 1.2070 or lower at 1.2057.