2020-01-22 • Updated
The sideways trading of USD/CAD may be finally over after the meeting of the Bank of Canada at 17:00 MT time. While the market expects the interest rate to remain unchanged at 1.75%, there is a possibility that the BOC governor Stephen Poloz surprises us with an unexpected comment in the statement or during the press conference. If it is dovish, the outcome of the meeting will be just in line with the forecasts of analytical banks which predict the short-term weakness in the Canadian dollar.
But are there actually any reasons for the Canadian central bank to be pessimistic? Let’s find out.
The robust employment figures released earlier this month showed signs of improvement of the Canadian economy. While the employment level advanced by 35.2 thousand people, the unemployment rate fell to 5.6%. At the same time, the indicator of the BOC Business outlook survey remains above the zero line at 0.74.
BOC Business Outlook Survey indicator
Sourced by: the Bank of Canada
Despite these facts, the Canadian dollar keeps being weak since the beginning of 2020, and analysts of TD Securities Inc. and Brown Brothers Harriman give a bearish outlook for the short-term performance of the CAD. They mention the slowdown of the Canadian GDP growth by 0.1% in the previous month as the main factor which may affect the regulator’s decision. Today's lower-than-expected inflation rate (1.7% vs 1.9% expected) may also be mentioned here.
Canada's GDP growth, monthly
Sourced by: Tradingeconomics
According to Bloomberg, the speculators and hedge funds keep being bullish on the CAD. They expect the central bank to continue following the updates on trade especially after the United States-Mexico-Canada Agreement (USMCA) has been finally approved by the US lawmakers.
All in all, the Bank of Canada definitely has a chance to shake the loonie today. If the bank indicates no dovish turns, the Canadian dollar may strengthen. In this case, wait for the breakout of 1.3031 on the daily chart of USD/CAD with the following slide towards the 1.2960 level. On the other hand, the negative comment may push the pair above the resistance at 1.3080. The next level will lie at 1.3135.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
Last Friday’s NFP was disappointing. The reaction of the markets was astonishing. Will it last longer? Let's find out the main trade opportunities for the upcoming week.
This week is full of important news, starting with PMIs in the key economies, with Jackson Hole Symposium as a cherry on the top.
Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...
Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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Don’t waste your time – keep track of how NFP affects the US dollar and profit!
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