The USDCAD could see volatility this week as the Bank of Canada meets to share its latest interest rate announcement. The BoC currently has rates at 0.25%, which is higher than many other developed nations and a surprise cut cannot be ruled out.
Snow is starting to fall in Canada and virus cases are rising, so the bank is likely to show a cautious tone. Traders are expecting the bank’s Governor Tiff Macklem to stay put on rates at 0.25% but that’s maybe not a certainty. Annual GDP took a 13% hit in the second quarter and although unemployment is falling, it is still at 9%.
The 378,200 jobs added last month and solid retail sales may just fend off any surprise move and the inflation picture is another reason that the bank may wait out this meeting. Core inflation surprised to the upside with a rise from 0.8% in August to 1% in September and the bank may be wary of igniting that further with lower rates, despite the threat of a second global slowdown due to the virus.
Before the interest rate decision, we will see the latest Durable Goods numbers from the US today with a 0.5% gain expected, compared to 0.4% last month. Consumer confidence is also expected to show a small improvement. These numbers may not have the same importance due to fears of surging cases around the world and the dollar could see further gains from safe haven flows and the disappearing stimulus package, where one lawmaker said that if no deal was done before the election it would likely be in February.
USDCAD Technical Outlook
USDCAD moved higher to test the 50-day moving average at 1.3200 and has since paused. The rally from 1.3100 could signal a double bottom and a chance for further gains to the 1.3300-3400 levels. A close near 1.3100 would likely see further losses in the pair. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.