USD/CAD has reversed directions in the Tuesday session. In North American trade, the pair is trading at 1.3167, down 0.36% on the day.
Bank of Canada on center stage
Investors will be keeping a close eye on the Bank of Canada on Wednesday, when the central bank holds its monthly policy meeting. The bank slashed rates back in March to just 0.25%, when the Covid-19 pandemic spread and paralyzed large swathes of Canada’s economy. Policymakers have not altered rates since then, and with the economy showing signs of recovery, the bank is widely expected to maintain rates. The rate statement could affect the Canadian dollar, as investors will be interested in the bank’s view of the health of the economy.
US Durables Goods
There was positive news from capital goods orders in September. The headline reading climbed 1.9%, up sharply from 0.4%. This easily beat the estimate of 0.5%. Core durable goods orders accelerated from 0.4% to 0.8%, and was above the forecast of 0.3%. With the September gain, core durable goods orders have now recovered to their pre-pandemic levels, which is an encouraging sign. As well, these releases follow recent data which shows gains in retail sales and the housing market. Despite these rosy numbers, Covid-19 is exploding in the US and government funding has dried up, which are worrying signs that economic activity in the fourth quarter could experience a slowdown.
With the US election only one week away, we can expect an increase in volatility in the currency markets. Democratic nominee Joe Biden continues to lead in the polls, and there are many market players are preparing for a “Blue Sweep”, in which the Democrats will win the presidency and also take control of the Senate and House of Representatives. Such a scenario would likely raise risk sentiment and would be bullish for the Canadian dollar.
- There is weak resistance a 1.3182, followed by a key resistance line at 1.3319
- 1.2986 is providing support. Below, there is support at 1.2905
- The 20-day MA line remains relevant
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