Bank of Canada Expected to Hold Key Rate Steady

The Canadian dollar has been looking a little weak against the U.S. dollar over the past couple of days and it seems that the USD bulls could take control ahead of the release of the interest rate statement by the Bank of Canada today. The BoC is expected to remain on hold, 0.50%, as the central bank is yet to report on the effects of the government’s stimulus package. The central bank will also update its forecast for economic growth in its quarterly monetary policy report. It should be noted that the BoC cut its key rate twice last year to deal with the sharp drop in global energy prices.

In a statement earlier this month, Bank of Canada Senior Deputy Governor Carolyn Wilkins said about the progress in the Canadian economy and how the central bank works to achieve the 2% inflation target. She added, that there are signs of hope in Canada’s economy as oil has recently moved back above $50 following the OPEC (Organization of the Petroleum Exporting Countries) meeting a few weeks ago.

USD/CAD - Technical Outlook
As you can see on the chart below, the USD/CAD pair failed to break, or close, below the key support level at 1.3000. On top of this, additional support was found from both the 100-SMA and the 200-SMA on the weekly chart. Moreover, it should be noted that the long-term ascending trend line, which dates back in April 2016 continues to provide a significant support to the price action. If these continue to hold, it would suggest that traders are still bullish on the pair. Therefore, the next levels to watch are the 1.3140 and then the 1.3200 key level. If the pair breaks below 1.3035 further support should be found around 1.3000. A break of this level would suggest that temporarily at least, the momentum has swung in the favor of the Canadian dollar, prompting a bigger move back towards 1.2950, 50% retracement.