The USD/CAD price is struggling ahead of the Bank of Canada (BoC) interest rate decision. The pair is trading at 1.2800, which is slightly higher than this week’s low of 1.2766. In total, the Canadian dollar has risen by more than 12% since March.
The Bank of Canada will conclude its final meeting of the year today. According to Bloomberg, most economists don’t expect any changes to the existing policy. This means that it will leave interest rates t 0.25% and continue its asset purchases at the pace of c$4 billion per week. The bank will also possibly commit to leaving rates at the current rate until 2023.
The BOC decision is coming at a mixed period for the Canadian economy. On the one hand, the Canadian dollar has soared against key peers and the price of crude oil has risen by more than 200% in the past few months. Also, the country is in line to become the first ones to start delivering the Covid vaccine.
On the other hand, the Canadian economy is expected to weaken in the first quarter as the number of Covid cases rise. Also, the country’s deficit is rising. In the previous mini-budget speech, Justin Trudeau said that deficit would rise to c$381 billion this tear.
USD/CAD technical outlook
Turning to the four-hour chart, we see that the USD/CAD is in a sharp downward trend. It is actually hovering near its 2018 lows. Also, the pair has moved below the 25-day weighted moving average. It is also below the descending black trendline that connects the highest levels in December. Notably, it is below the important support at 1.2923, which is the November 9 low.
Therefore, while an upward reversal is possible, the path of least resistance for the USD/CAD is lower. For today, the key levels to watch will be the support at 1.2762 and the resistance at 1.2850.
USD/CAD technical chart