BoC Preview: What to expect of USD/CAD

The Bank of Canada will hold its monetary policy meeting later today. Consensus among investors expects the central bank to keep the refi rate unchanged at 0.50% amidst a cautious tone from the statement.

In view of strategists at TD Securities, “With no MPR or press conference, Poloz will have to rely on the statement as his sole channel for communication. In the statement, we expect the Bank to retain its cautiously optimistic tone and confirm that the outlook is still consistent with the October MPR. Any mention of the move higher in rates is likely to be expressed as an observation and not a means for concern”.

Regarding FX, CAD remains almost exclusively driven by crude oil dynamics, especially after the recent OPEC deal, relegating the US-CA 2-year yield differential to a secondary role for the time being.

In the short time, USD/CAD appears supported around yesterday’s lows near 1.3230, while it is currently retreating for the second consecutive week after clinching multi-month peaks near 1.3600 the figure (November 9). The next relevant support emerges in the 1.3190 area, where sits the 100-day sma. On the upside, the interim hurdle lines up just above the 1.3300 handle, where coincide the 38.2% Fibo retreatment of the 2016 drop and the 55-day sma, ahead of Monday’s tops in the mid-1.3300s.