USDCAD in Focus As Bank of Canada (Boc) Readies Rate Decision

Summary:

The Bank of Canada (BoC) is to deliver its interest rate decision tomorrow, along with the quarterly monetary policy report.

The USDCAD will be in focus when the Bank of Canada (BoC) releases a tripod of market-moving data: its monetary policy report, interest rate decision and rate statement. Data will be published at 2 p.m. GMT.

This month’s meeting is the first that Tiff Macklem will preside over as the new BoC Governor. While the BoC is expected to keep rates steady at 0.25%, its quarterly Monetary Policy Report may be a big deal for tomorrow.

Canada has had a slew of mixed economic data. On the one hand, the employment conditions are improving. Still, on the other, the GDP fell 11.6% in the 1st quarter as a result of the economic impact of the coronavirus pandemic and falling crude oil prices. Despite a two-month rise in oil prices, there has not been much progress beyond the $40 mark, and crude is nowhere near its pre-coronavirus price levels. Rising coronavirus cases in the US could trigger a flight towards safety, which is negative for the commodity-linked CAD.

One of the talking points will be on what the BoC will do to support the local bonds market in terms of putting caps on long-term yields. This could make a difference in things like the housing market and mortgage rates.

Outlook for the USDCAD

The USDCAD is presently trading in a range that has the 1.36961 resistance as the ceiling, and 1.34656 as the floor. A dovish BoC could allow the USDCAD to test this upper border, with a breakout enabling the pair to target the 1.37629 resistance. 1.38605 is also an upside target of interest.

On the flip side, a hawkish BoC could allow the pair to challenge the range’s floor, with the possibility of attaining 1.33487 if the floor is taken out. 1.32044 is a support target which may be attainable with some support from OPEC + meeting news which props up crude oil prices. The OPEC + meeting scheduled for tomorrow could have an external impact on this pair, and traders need to be aware of this as well.