USD/CAD Outlook Mired Ahead of BoC Meeting as 2018 Rally Unravels

CANADIAN DOLLAR TALKING POINTS

USD/CAD quickly approaches the monthly-low (1.2729), but the pair stands at risk of facing range-bound prices ahead of the next Bank of Canada (BoC) meeting on May 30 as the central bank is widely anticipated to keep the benchmark interest rate at 1.25%.

USD/CAD Outlook Mired Ahead of Bank of Canada (BoC) Meeting as 2018 Rally Unravels

In light of the limited reaction to the 1.1% expansion in Canada Wholesale Trade Sales, the data print may do little to sway the monetary policy outlook as the BoC persistently warns that ‘some monetary policy accommodation will still be needed to keep inflation on target.’

With that said, the BoC may merely attempt to buy more time next week as ‘growth in the first quarter was weaker than the Bank had expected,’ and more of the same from Governor Stephen Poloz and Co. may undermine the recent rebound in the Canadian dollar as the central bank appears to be in no rush to implement higher borrowing-costs.

Keep in mind, the broader outlook for USD/CAD remains mired by the failed attempt to test the March-high (1.3125), with the pair facing a growing risk of extending the pullback from the monthly-high (1.2998) as the advance from earlier this year unravels.

USD/CAD DAILY CHART

• Fresh series of lower highs & lows raises the risk for a further losses in USD/CAD, but need a break/close below the 1.2720 (38.2% retracement) to 1.2770 (38.2% expansion) to open up the downside targets, with the first region of interest coming in around 1.2620 (50% retracement) followed by the Fibonacci overlap around 1.2440 (23.6% expansion) to 1.2510 (78.6% retracement), which sits just beneath the April-low (1.2527).
• However, failure to break/close below the stated region may continue to foster range-bound prices, with the near-term outlook capped by the 1.2980 (61.8% retracement) to 1.3030 (50% expansion).

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

ADDITIONAL TRADING RESOURCES

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.