The Canadian dollar has posted slight gains in the Wednesday session. Currently, USD/CAD is trading at 1.2783, down 0.28% on the day.
Bank of Canada decision expected to maintain rates
The Bank of Canada holds its monthly policy decision today (13:30 GMT). The final meeting of the year will not include a follow-up press conference with BOC Governor Macklem or a new set of bank forecasts, so investors and traders will have to make do with the rate statement. The expectations for anything dramatic this afternoon is minimal. In the current global environment of ultra-low interest rates, it would be a shock to see any change to the Overnight Rate, which has been pegged at 0.25% since March. The central bank is unlikely to trim rates any lower, with the economic recovery showing some traction. At the same time, the bank has indicated that it could be years before it hikes interest rates.
With little suspense over the rate decision, investors and traders will be focussed on the BoC rate statement. The tone of the statement could affect the Canadian dollar, as a positive message from policymakers will act as a vote of confidence in the economy and could boost the Canadian currency. Conversely, a pessimistic portrayal of economic conditions will likely weigh on USD/CAD. Canada’s economy has shown positive data, such as employment. However, the Canadian economy is very dependent on the United States; as the saying goes, when the US sneezes, Canada gets a cold. This means that in order for the Canadian economy to return to pre-pandemic levels, it will need the US economy to lead the way.
It has been a sleepy start to the week for USD/CAD, but traders should be prepared for more significant movement from the pair around the time of the BoC rate decision on Wednesday (13:30 GMT).
The daily support and resistance lines are as follows:
- 1.2832 has some breathing room in resistance. Close by, there is resistance at 1.2862. Above, the 10-day MA is situated at 1.2890
- USD/CAD is testing support at 1.2774, followed by a support line at 1.2746
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