Canadian Dollar Outlook: USD/CAD Testing Support as Rate Decisions Loom
USD/CAD Price, News and Chart:
- Recent USD/CAD sell-off may have room to run further.
- FOMC and BoC rate decisions and reasoning out Wednesday.
USD/CAD Price Nearing Multi-Month Support
An important 24 hours for USD/CAD traders with two central bank rate decisions on the slate Wednesday. The Bank of Canada (BoC) is expected to leave rates unchanged at 1.75%, while the Federal Reserve is fully expected to cut interest rates by 25 basis points to a band of 1.50% - 1.75%. If this happens, Canada will have the highest interest rates in the G7, giving the Canadian Dollar an underlying bid against its US counterpart. Canadian 2-year government bonds now offer a higher yield than comparable US Treasuries as future interest rate expectations are pirced into both currencies.
USD/CAD 2-Yr Government Bond Yields (2014 – Oct 29, 2019)
USD/CAD currently trades around 1.3050, just above the multi-month low at 1.3015 and below the 38.2% Fibonacci retracement level at 1.3128. The recent sell-off has been sharp and the pair trade comfortably below all three moving averages. If USD/CAD breaks below 1.3015, and the psychological 1.3000 level, then the next layer of support is provided by the 50% Fib retracement at 1.2960 before the October 2018 higher low at 1.2790.
USD/CAD Daily Price Chart (September 2018 – October 29, 2019)
Recent daily and weekly positional changes confirm this bearish bias.
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