Trade CAD on the Bank of Canada Interest Rate Decision

Although the major focus for FX traders today will be on the small matter of the Federal Reserve rate call later in the day, the initial focus for North American markets will be on Ottawa and the Bank of Canada’s rate decision. The market is firmly pricing in a 25-basis-point rate cut as the bank continues to battle with high unemployment. However, as with the central bank further south, big moves are expected for the currency on the forward guidance that we receive from the Rate Statement and consequent Press Conference.

USDCAD is currently sitting close to monthly lows, and any more dovish indications from the committee could see the CAD appreciate significantly and the support for the Loonie break. The bank is still concerned with possible inflation issues from US tariffs, and if these are highlighted, then the update could be interpreted as less dovish than expected, and we could see USDCAD move back up into recent ranges. Whatever the outcome, traders will be aware that the Fed call later in the day will have a bigger impact on the dollar side of the equation, so they may look to convert any USDCAD positions into CAD cross positions to take advantage of further moves.

Resistance 2: 1.3924 – August High
Resistance 1: 1.3852 – Trendline Resistance

Support 1: 1.3731 – Trendline Support and September Low
Support 2: 1.3632 – Long-Term Support Trendline

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