USD/CAD Price Forecast: Loonie Brittle Ahead of Tomorrow’s BoC Rate Decision
USD/CAD Analysis: Key Takeaways
Canadian Dollar: Fundamental Underpinnings
During the European trading session on Tuesday, the Canadian dollar experienced a decline in value compared to the USD. This was due to the market's reaction to concerns about the Chinese economy. The disappointing performance of Chinese Caixin PMI's also contributed to the weakening of the loonie, as China is an important trading partner for Canada. Additionally, the CAD was negatively affected by the rise in crude oil prices and the increase in bids for the Dollar Index (DXY) in a risk-averse market.
There are no major events happening today that will significantly affect the USD/CAD currency pair. Tomorrow, we will be focusing on the Bank of Canada's decision on interest rates and the US ISM services PMI. Before the rate announcement, Canada's inflation, both core and headline, has been decreasing. This has led money markets to believe that the current monetary policy is sufficient in controlling inflationary pressures.
Comparison of the Canadian Consumer Price Index and Interest Rates in Canada
Economic Calendar for the USD/CAD Pair in Greenwich Mean Time +02:00 Zone
Source: DailyFX Economic Schedule
According to the data provided in the table, market predictions suggest that the Bank of Canada will maintain current interest rates and potential reductions may occur towards the conclusion of 2024.
Chances of Interest Rate Decisions by the Bank of Canada
Assembled graph devised by Warren Venketas from IG.
The price movements of USD/CAD each day indicate a clear rebound from today's peak of 1.3668. The recent increases in price are different from the decreasing peaks shown on the Relative Strength Index (RSI), indicating a bearish/negative divergence. This usually suggests that a drop in price is likely to happen soon, but it is uncertain when it will occur. The release of important data tomorrow could further support this expected decline, especially if the Bank of Canada presents a slightly hawkish stance while ISM services remain in line with expectations.
IG Traders Bullish: Sentiment Data
According to the data from IGCS, it is apparent that retail traders are currently holding a bearish stance on USD/CAD. Around 76% of traders can be seen having short positions at the moment. To gain more insight into the impact of daily and weekly changes in positions on the sentiment and future prospects of USD/CAD, you can download the most recent sentiment guide provided below.
Get in touch with and stay connected to Warren on the social media platform Twitter by following his handle: @WVenketas.
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