USD/CAD signal: BOC rate interest rate decision preview
- The USD/CAD pair cratered on Tuesday after strong data from Canada.
- Canada’s exports, imports, and manufacturing PMIs were positive in November.
- Focus shifts to the upcoming BOC interest rate decision.
The USD/CAD price declined sharply on Tuesday after the strong economic numbers from Canada. It also declined as investors waited for the latest Bank of Canada (BOC) interest rate decision. It is trading at 1.2645, which is about 1.65% below the highest level this week.
Bank of Canada decision
The Canadian economy is doing relatively well as evidenced by the recent economic numbers. On Friday, data by Statistics Canada showed that the country added more than 150k jobs in November while the unemployment rate declined. The country’s inflation has also jumped to the highest level in years.
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And today, data by the agency showed that Canada’s exports and imports rose sharply in November. Exports rose from more than $52.80 billion to more than $56.18 billion. Imports, on the other hand, rose from more than $51.39 billion to more than $54 billion. As a result, the trade surplus widened to more than $2 billion, which is a positive sign for the economy.
The USD/CAD also declined after the relatively strong PMI numbers. According to the Ivey Institute, the Canadian PMI rose from 59.3 in October to 61.2%. This is a sign that manufacturers and service providers are doing relatively well.
At the same time, the price of crude oil has rebounded sharply. Brent has risen by more than 4.5% to trade at $75 while the West Texas Intermediate (WTI) has risen to $72. This trend has emerged as investors react to fresh information about the Omicron variant. Higher oil prices are important for the Canadian dollar because of the volume that it ships.
It is against this backdrop that the Bank of Canada (BOC) is holding its meeting. Economists expect that the bank will leave interest rates unchanged at 0.25% and sound a bit hawkish.
The daily chart shows that the USD/CAD pair has been in a bullish trend in the past few weeks. It rose by more than 7% from its lowest level this year. This trend ended today after the positive economic numbers and as traders wait for the latest BOC interest rate decision. It has formed a double-top pattern, which is usually a bearish signal. Still, this pattern can also be seen as a cup and handle pattern as shown in green.
Therefore, the pair will likely rebound after the RBA decision. This will be confirmed if it moves above the resistance level at 1.2892.
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