We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Bullish
USD/JPY
Bullish
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Bitcoin
Bearish
More View more
Notice

DailyFX PLUS Content Now Available Freely to all DailyFX Users

Real Time News
  • Heads Up:🇨🇦 CAD Consumer Price Index (YoY) (AUG) due at 12:30 GMT (15min), Actual: N/A Expected: 1.9% Previous: 2.0% https://www.dailyfx.com/economic-calendar#2019-09-18
  • Heads Up:🇨🇦 CAD Consumer Price Index n.s.a. (MoM) (AUG) due at 12:30 GMT (15min), Actual: N/A Expected: -0.2% Previous: 0.5% https://www.dailyfx.com/economic-calendar#2019-09-18
  • Heads Up:🇺🇸 USD Housing Starts (MoM) (AUG) due at 12:30 GMT (15min), Actual: N/A Expected: 5.0% Previous: -4.0% https://www.dailyfx.com/economic-calendar#2019-09-18
  • Heads Up:🇺🇸 USD Building Permits (MoM) (AUG) due at 12:30 GMT (15min), Actual: N/A Expected: -1.3% Previous: 8.4% https://www.dailyfx.com/economic-calendar#2019-09-18
  • Forex Update: As of 12:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: -0.02% 🇨🇦CAD: -0.05% 🇪🇺EUR: -0.19% 🇳🇿NZD: -0.26% 🇦🇺AUD: -0.32% 🇬🇧GBP: -0.32% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/ykwkJ9arRI
  • Traders should know how to confidently approach, enter and exit both Bull or Bear markets. Need some insight into it? Get it from @nickcawley1 here: https://t.co/GhvvFrB3gz https://t.co/HcUUXMO1bK
  • 🇬🇧 GBP BOE Asset Purchase Target (SEP), Actual: N/A Expected: 435b Previous: 435b https://www.dailyfx.com/economic-calendar#2019-09-19
  • 🇬🇧 GBP Bank of England Bank Rate (SEP 19), Actual: N/A Expected: 0.75% Previous: 0.75% https://www.dailyfx.com/economic-calendar#2019-09-19
  • European parliament favours Breixt extension if one is to be requested $GBP
  • Having a consistent trading strategy can’t be understated when it comes to the process of trading. How can having a consistent strategy avoid #FOMOintrading? Find out from @WVenketas here: https://t.co/f4y1FOOZnM https://t.co/2QHVgRlMc7
USD/CAD Price Outlook Ahead of Bank of Canada Rate Decision

USD/CAD Price Outlook Ahead of Bank of Canada Rate Decision

2019-09-03 17:21:00
Rich Dvorak, Junior Analyst
Share:

SEPTEMBER BOC MEETING & CANADIAN DOLLAR PRICE OUTLOOK:

  • Canadian Dollar price action has whipsawed in the run-up to the September BOC meeting
  • The Bank of Canada is expected to leave its key interest rate unchanged, but traders will likely scrutinize updated remarks on monetary policy outlook from BoC Governor Poloz
  • Join DailyFX for free live webinar coverage of the September Bank of Canada Interest Rate Decision hosted by Senior Currency Strategist Christopher Vecchio, CFA

The September BOC meeting is expected to reveal no change to the central bank’s benchmark interest rate, which currently stands at 1.75%. Looking further out, however, we see the Bank of Canada rate cut probability grows exponentially to a 75% chance by its December meeting according to overnight swaps pricing. That said, Canadian Dollar price action will likely respond to details found within the BOC’s updated monetary policy statement and accompanying commentary from Governor Poloz.

BOC – BANK OF CANADA INTEREST RATE CUT PROBABILITIES

BOC Bank of Canada Rate Cut Probability Chart

Most prominently, markets will likely look for any signs of a shift in the BOC’s policy stance toward a more dovish tone in lieu of its current relatively hawkish position. The heavy weight currency traders are placing on the September BOC meeting could be explained by recent economic data painting a mixed depiction of the Canadian economy, which has made the market’s expectations of future BOC monetary policy decisions increasingly ambiguous. Consequently, the loonie has whipsawed around looming event risk despite technicals suggesting the Canadian Dollar appeared ripe for a breakout.

CANADA ECONOMIC SURPRISE INDEX (CITI)

Canada Economic Surprise Index Price Chart

Canadian economic data has improved considerably throughout August according to the Citi economic surprise index, but details behind the headline indicators appear less sanguine. On the bright side, Canadian inflation and retail sales have held up quite well. Conversely, the July jobs data printed a huge miss and could convey signs of weakness emerging across Canada’s labor market. Also, while Q2 Canada GDP data came in better than expected, looking “under the hood” of the report uncovered a notabledrop in business investment and uninspiring slowdown in household spending.

CANADIAN DOLLAR IMPLIED VOLATILITY & TRADING RANGES

Canadian Dollar Price Chart Implied Volatility Trading Ranges Ahead of September BOC Meeting

As such, Canadian Dollar overnight implied volatility has jumped ahead of the September BOC meeting with the readings on USDCAD, CADJPY, EURCAD, GBPCAD and AUDCAD all above their 12-month averages. GBPCAD is expected to be the most volatile CAD-pair in light of heightened Brexit risk with CADJPY behind as a close second owing to the potential impact BOC monetary policy changes could have on JPY-funded carry trades.

USDCAD PRICE CHART: DAILY TIME FRAME (APRIL 08, 2019 TO SEPTEMBER 03, 2019)

USDCAD Price Chart Technical Analysis September BOC Meeting Forecast

Judging by USDCAD overnight implied volatility of 6.27%, spot prices are estimated to trade between 1.3462-1.3419 with a 68% statistical probability. A dovish shift by the BOC tomorrow, if confirmed, will likely push spot USDCAD toward major confluence around the 1.34 handle and above technical resistance posted by the 61.8% Fibonacci retracement level of its May 31 swing high.

Alternatively, a firm stance reiterated by the Bank of Canada stands to send spot USDCAD whipsawing back lower where prices may find technical support around the 1.3300 area before testing the lower bound of its option-implied trading range. Also, bullish uptrend support extended from the series of higher lows since mid-July could also help keep spot USDCAD afloat going forward.

USDCAD – IG CLIENT SENTIMENT INDEX PRICE CHART: DAILY TIME FRAME (MARCH 07, 2019 TO AUGUST 03, 2019)

USDCAD Price Chart

According to IG Client Sentiment data, 31.2% of spot USDCAD retail forex traders are net-long resulting in a short-to-long ratio of -2.21 to 1. Interestingly, traders have remained net-short since Jul 23 when USDCAD traded near 1.30435; price has moved 2.5% higher since then. Also, the number of traders net-long is 12.5% lower from last week whereas the number of net-shorts is 2.8% higher over the same period, which gives our bearish contrarian view to crowd sentiment further credence.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.