USD/CAD Awaits Bank of Canada Decision Amidst US Dollar Rebound
USD/CAD Awaits Bank of Canada Decision Amidst US Dollar's Rebound
The USD/CAD pair has staged a recovery, hovering near the 1.3750 mark following a robust rebound in the US Dollar. Currently, spot prices trade just above 1.3750, marking a three-week high reached on Tuesday. Traders are in a state of anticipation as they await the policy decision from the Bank of Canada (BoC), which is likely to influence the pair's next directional move.
The Bank of Canada is widely expected to maintain its benchmark interest rates at 5.0%, a level not seen in 22 years. This decision will be consistent with the previous month's choice and is motivated by declining consumer and business confidence in the Canadian economy. Furthermore, the BoC may exhibit less certainty about the necessity for a more aggressive policy tightening, primarily due to easing inflationary pressures. This, coupled with the recent decline in crude oil prices, is exerting pressure on the commodity-linked Canadian Dollar (CAD) and acting as a tailwind for the USD/CAD pair.
On the other side of the equation, the US economy is displaying resilience, as evident from the flash version of the US Purchasing Managers' Index (PMI) released on Tuesday. It revealed that business activity in the manufacturing sector moved out of contraction territory for the first time in six months, while services activity accelerated moderately in October. This data serves as an indicator that the US economy is holding up well despite surging interest rates. Such resilience is likely to enable the Federal Reserve (Fed) to maintain its current rate-hiking cycle aimed at controlling inflation. Consequently, this outlook should limit substantial declines in US bond yields and favor USD bulls.
From a technical standpoint, our perspective leans towards a continuation of the long position, with an initial target set at 1.3800, and potential extensions pushing toward the 1.3980 target.
Our preference
Long positions above 1.3600 with targets at 1.3800 & 1.3980 in extension.
Our previous Idea:
The USD/CAD pair has staged a recovery, hovering near the 1.3750 mark following a robust rebound in the US Dollar. Currently, spot prices trade just above 1.3750, marking a three-week high reached on Tuesday. Traders are in a state of anticipation as they await the policy decision from the Bank of Canada (BoC), which is likely to influence the pair's next directional move.
The Bank of Canada is widely expected to maintain its benchmark interest rates at 5.0%, a level not seen in 22 years. This decision will be consistent with the previous month's choice and is motivated by declining consumer and business confidence in the Canadian economy. Furthermore, the BoC may exhibit less certainty about the necessity for a more aggressive policy tightening, primarily due to easing inflationary pressures. This, coupled with the recent decline in crude oil prices, is exerting pressure on the commodity-linked Canadian Dollar (CAD) and acting as a tailwind for the USD/CAD pair.
On the other side of the equation, the US economy is displaying resilience, as evident from the flash version of the US Purchasing Managers' Index (PMI) released on Tuesday. It revealed that business activity in the manufacturing sector moved out of contraction territory for the first time in six months, while services activity accelerated moderately in October. This data serves as an indicator that the US economy is holding up well despite surging interest rates. Such resilience is likely to enable the Federal Reserve (Fed) to maintain its current rate-hiking cycle aimed at controlling inflation. Consequently, this outlook should limit substantial declines in US bond yields and favor USD bulls.
From a technical standpoint, our perspective leans towards a continuation of the long position, with an initial target set at 1.3800, and potential extensions pushing toward the 1.3980 target.
Our preference
Long positions above 1.3600 with targets at 1.3800 & 1.3980 in extension.
Our previous Idea:
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