USD/CAD volatility rises ahead of BOC interest rate decision

The USD/CAD pair wavered today as the market reflected on the price action in the crude oil market and the US bond market. After falling to 1.2617, the pair rebounded by 0.55% to 1.2690.

Bank of Canada decision ahead

The USD/CAD dropped sharply in early trading after the price of crude oil rallied. Brent, the global benchmark, rose to $71 for the first time in more than 12 months. The West Texas Intermediate (WT) rose to $68.

Oil prices rose as investors reacted to a missile attack by Houthi rebels in a Saudi Arabia terminal. In the afternoon session, however, the price declined as they assessed the damage caused by the attack. Saudi Arabia said that the missiles were intercepted and that the damage was minimal.

Further, oil price rose because of the massive US $1.9 trillion stimulus package and last week’s deal between OPEC and its allies to pause supply increases. The USD/CAD tends to react to oil price movement because Canada is the fourth oil exporter. 

The USD/CAD is also wavering because of the stimulus and the overall jump in US Treasury yields. The short, long, and medium-term government bonds rose sharply as investors started to price-in a faster economic recovery and eventual Federal Reserve tightening.

The USD/CAD will also have significant movements this week because of the Bank of Canada (BOC) interest rate decision scheduled for Wednesday. Economists expect the bank to keep its monetary tools unchanged since the economy is recovering. 

On Friday, the statistics bureau will publish the February jobs numbers. Economists expect the data to show that the economy added 75,000 jobs in February as the unemployment rate fell to 9.2%. 

USD/CAD technical forecast

The four-hour chart shows that the USD/CAD pair has been relatively volatile in the past few weeks. The pair fell to 1.2570 on March 4 and then rebounded to 1.2738. The price is between the 50% and 61.8% Fibonacci retracement level. 

It is also a few pips above the 25-period and 15-period exponential moving averages (EMAs). The Average True Range (ATR) has been elevated, which is a sign of volatility. Therefore, the key levels to watch will be 1.2570 and 1.2735.