USD/CAD is trading sideways as investors eye the BoC interest rate decision scheduled for later in the day. The central bank is set to maintain the overnight rates at 0.25%. However, economists expect it to further cut its weekly bond purchases by a third to C$2 billion.
If that happens, it will be the third time that BoC is tapering its asset purchases after the move in October and April. Its decision to tighten the monetary policy comes as the Canadian economy steadily recovers from the coronavirus pandemic.
Notably, a hawkish tone will likely exert pressure on USD/CAD. Jerome Powell’s testimony and US oil inventory data will also impact the pair.
USDCAD technical outlook
USD/CAD is on a bullish consolidation pattern ahead of the BoC interest rate decision. On Tuesday, the currency pair rallied from an intraday low of 1.2443 to the day’s high at 1.2540. The rise was a reaction to the better-than-expected US inflation data. At the time of writing, it was down by 0.14% at 1.2497. On a two-hour chart, it is trading along the 25-day EMA and slightly above the 50-day EMA.
I expect the currency pair to continue trading sideways as investors await further cues from the BoC. As a reaction to the event, a move below its current support level along the 50-day EMA at 1.2443 will clear the bears’ path to 1.2400.
On the upside, the bulls will need to gather enough momentum to push the price past the current resistance level at 1.2528. If that happens, the next target will be at the psychological level of 1.2600.