The Bank of Canada (BoC) will publish its monetary policy statement later today. The Canadian dollar is out of steam ahead of the policy meeting, as the traders do not expect big optimism. In the last policy meeting, the central bank raised the confidence, revising upwards the GDP forecasts for 2016 and 2017 and stating that the inflation rate would return to Canadian central bank’s 1% - 3% target in the upcoming months. However, the BoC Governor Stephen Poloz destroyed all the optimism by sharing that another rate cut is still on the table.
The release of the BoC interest rate decision accompanied by a rate statement is scheduled at 15:00 GMT today. The traders will pay some attention to the statement, though the central bank is widely expected to keep its overnight rate unchanged at 0.5%. If they mention again that a rate cut is possible, we will see USD/CAD adding, even more, gains.
USD/CAD – Technical Analysis
The U.S. dollar advanced strongly against the Canadian dollar during Tuesday’s and early Wednesday’s trading sessions, locking both of our last two suggested targets (1.3160 and 1.3280) in our previous analysis and surpassing above them (See our analysis here: “USD/CAD Profit Locked at 1.3160").
Currently, the USD/CAD currency pair is facing a short-term consolidation slightly above the 1.3300 support level. We remain bullish on the pair as we expect that price will continue to rise today with next target the resistance level at 1.3388. We assume that each pullback could be used for taking new long positions. In opposite scenario, moving below 1.3190 (still away from the current price), the forecast for rising will not be valid anymore and then the bias may change to bearish with a first target focused on the 1.3130 support barrier.
The technical indicators submit bullish signals endorsing our perspective. Both SMAs with 50 and 100 periods, on the 4-hour chart, are below the price and the latest cross of the 50-SMA above the 100-SMA is also a signal for uptrend movement. RSI is sloping up above the 70 level in the so-called “overbought” zone also adding to the odds that USD/CAD will advance further.
