USD/CAD prediction ahead of the BOC interest rate decision
- The USD/CAD pair has been in a tight range in the past few weeks.
- The Canadian dollar has been supported by the rising crude oil prices.
- The Bank of Canada will deliver its interest rate decision on Wednesday.
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The USD/CAD price moved sideways on Wednesday morning as investors waited for the upcoming interest rate decision by the Bank of Canada. It is trading at 1.2717, which is a few points above this week’s low of 1.2660.
Bank of Canada decision
The BOC will conclude its monthly meeting on Wednesday evening. Analysts expect that the central bank will decide to hike interest rate by about 25 basis points to 0.50%. This will be the first rate hike by the bank since 2018.
The rate hike comes at a time when the country’s economy is doing well. Data published on Tuesday showed that the Canadian GDP rose at an annualized rate of 5.5% in the fourth quarter of the year. It rose by 1.6% on a quarter-on-quarter basis.
Other numbers have shown that the Canadian economy is doing well. For example, retail sales jumped in January while inflation soared to the highest level in more than a decade. At the same time, the country’s labor market has been a bit strong, with the unemployment rate falling to the lowest level since the pandemic started.
Therefore, the BOC has the justification to hike interest rate. However, like the Reserve Bank of Australia said on Tuesday, the ongoing crisis in Europe will have an impact on the economy. But to some extent, the crisis has led to higher crude oil prices, which will benefit the Canadian economy. Data by the country’s energy ministry shows that Canada produces over 4 million barrels of oil per day.
The USD/CAD pair will also react to the latest Canada and US jobs numbers that will come out on Friday. Analysts expect the data to show that the unemployment rates in the two countries dropped in February.
The four-hour chart shows that the USD/CAD pair has been in a tight range in the past few days. The pair is trading at 1.2717, which is a bit higher than this week’s low of 1.2652. It is also trading at the 25-day and 50-day moving averages while the price is slightly above the ascending trendline shown in black.
A closer look shows that the pair has formed a small head and shoulders pattern. Therefore, there is a likelihood that the pair will retreat after the BOC interest rate decision.