USD/CAD forecast ahead of the BOC interest rate decision
- The USD/CAD price maintained a bullish trend ahead of the BOC decision.
- The BOC is expected to leave interest rates unchanged at 0.25%.
- It will also maintain its quantitative easing plan.
The USD/CAD price rebounded on Tuesday as traders reacted to the US dollar spectacular comeback. They are also focusing on the upcoming Bank of Canada (BOC) interest rate decision. It is trading at 1.2635, which is the highest it has been since September 2.
Bank of Canada decision ahead
The USD/CAD price is rising as investors wait for the September decision by the Bank of Canada (BOC). The bank, which started its September meeting today, is expected to leave interest rates unchanged at 0.25% as the country gets into election mode.
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At the same time, the BOC will likely keep its asset purchases steady at the current pace of c$2 billion per week. The bank has already tapered its asset purchases program thrice. The most recent tapering came in the bank’s July meeting.
The status quo will happen as the country sees an uptick in Covid-19 cases, which could slow the recovery. Already, data by Statistics Canada showed that the country’s economy contracted by about 1.1% in the second quarter. That was lower than the BOC’s estimate of a 2.5% expansion.
Meanwhile, this decision comes at a time when Canada is gearing towards an election that was called last month. Therefore, analysts expect that the central bank will attempt to remain apolitical. In a nnote, an analyst at Bank of Montreal said:
“In an effort to remain apolitical, expect the Bank to soft-peddle the weakness in growth, and emphasize that there’s plenty of uncertainty.”
A press conference will not follow this decision. Therefore, the USD/CAD will react to a speech by Governor Tiff Macklem on Thursday. He will answer questions during the session, which could move the pair. The next key catalyst for the pair will be the upcoming Canada jobs numbers that will come out on Friday.
USD/CAD technical analysis
The three-hour chart shows that the USD/CAD pair has been in a bullish trend since Friday last week. The pair has managed to move from last week’s low at 1.2492 to the current high of 1.2630. Along the way, it has moved above the descending trendline shown in black.
It has also moved slightly above the 25-day and 50-day exponential moving averages (EMA). Also, the histogram of the MACD has moved above the neutral level. Therefore, the pair will likely keep rising ahead of the BOC decision.
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