USD/CAD Forecast and the BOC interest rate decision preview

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 27, 2021
  • The USD/CAD pair was in a tight range on Wednesday morning.
  • Investors are waiting for the latest interest rate decision by the BOC.
  • The pair has formed a rising wedge pattern.

The USD/CAD price remained in a tight range on Wednesday morning as investors waited for the latest interest rate decision by the Bank of Canada (BOC). The pair is trading at 1.2388, which was slightly above this month’s low of 1.2282. 

BOC interest rate preview

The Bank of Canada will conclude its two-day meeting on Wednesday. Economists expect that the country’s central bank will hold interest rates steady at about 0.25% in this meeting. They also expect that Tiff Macklem, the bank’s governor, will have communication problems since inflation is holding steady.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Instead of boosting interest rates, analysts expect that the bank will slash its weekly bond purchase program to about C$1 billion. This is equivalent to about $809 million and will be the fourth time that the BOC has tapered its asset purchases. Also, there is a likelihood that the bank’s officials will hint that they will soon end their balance sheet expansion program altogether. 

Meanwhile, data published by Bloomberg shows that most analysts expect that the Bank of Canada will start its rate increase hike cycle in the next six months. This is because the country’s inflation is rising at a rapid pace and is substantially above the BOC target of 2.0%. In a note, a Bloomberg analyst said:

“The Bank of Canada will turn more vigilant on inflation risks at Wednesday’s meeting. Though communications should prove hawkish relative to September, the BoC may lean against growing market expectations for a hike as early as April 2022.”

USD/CAD technical analysis

USD/CAD

The three-hour chart shows that the USD/CAD pair has been in a steady bullish trend in the past few days. Along the way, the pair has moved above the 25-day and 50-day moving averages. The two averages have already formed a bullish crossover pattern. 

Notably, the pair has formed a rising wedge pattern. In price action analysis, a rising wedge pattern is usually a bearish signal. 

Therefore, the pair will likely break out lower in the near term as the divergence between the Fed and BOC widens. The next key level to watch will be 1.2282.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

  1. Etoro, trusted by over 13m users worldwide. Register here >
  2. Skilling, simple, easy to use and regulated. Register here >