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USDCAD Price Outlook - Canadian Dollar Remains Firm Ahead of BoC Policy Announcement

USDCAD Price Outlook - Canadian Dollar Remains Firm Ahead of BoC Policy Announcement

Nick Cawley, Strategist

Canadian Dollar Price, News, and Analysis:

  • Bank of Canada to leave interest rates unchanged.
  • US dollar weakness and robust oil complex fuel USDCAD demise.

The Bank of Canada is expected to leave its overnight interest rate unchanged at 0.25% tomorrow and will also maintain its forward guidance and QE program. The bank sees the economy growing by 4% in 2021 and 4.5% in 2022 after an expected decline of around 5.5% in 2020. The banks’ last meeting on October 28 also noted that ‘oil prices remain about 30% below pre-pandemic level’ but this has changed with the oil complex rallying around 20% since those comments, underpinning the Canadian dollar, especially against a weak US dollar. A nod to the strength of the oil market by BoC governor Tiff Macklem tomorrow may well boost the Loonie further.

How Central Banks Impact the Forex Market

The daily USDCAD price chart shows the ongoing weakness in the pair with support levels broken with relative ease. In late-July the pair made a bearish ‘death-cross’ – the 50-sdma trading through the 200-sdma – while USDCAD trades below all three moving averages. The pair has found some support around the 1.2770 area but this is very recent and may not hold for long. Below here we go back to lows seen in May 2018. USDCAD may find some support from the CCI which shows the pair in extreme oversold territory

USDCAD Daily Price Chart (April – December 8, 2020)

USDCAD Price Outlook - Canadian Dollar Remains Firm Ahead of BoC Policy Announcement
{{SENTIMENT|Learn How to Use Sentiment in Your Trading Strategy}}

Retail trader data show 73.95% of traders are net-long with the ratio of traders long to short at 2.84 to 1.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

What is your view on the Canadian Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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