The G20 summit took place in Bali, Indonesia, on November 2022…
The overview of the CAD ahead of the BOC rate statement
Information is not investment advice
USD/CAD keeps bringing joy to range-bound traders while consolidating between the support at 1.35 and the resistance at 1.3630. What may put an end to this peaceful calmness? In fact, there are several main triggers. One of the most obvious is, of course, the rate statement by the Bank of Canada on July 15, at 17:00 MT time. Does it really have anything to offer to the CAD traders, though? Time to find out.
Analysts expect no changes from the Bank of Canada unless its new Governor Tiff Macklem surprises the markets. Despite improved economic conditions in June with better employment change (952.9K in June) and signs of slow recovery after significant stimulus measures, the risks still remain around the corner. Back in June, Mr. Macklem already highlighted his expectations of inflation pressure. So, it is unlikely for him to show optimism this time. Experts suggest that the regulator may keep its interest rate unchanged at 0.25% for about 2 years and buy more bonds to its balance sheet if needed. At the same time, they see no need for urgent actions during this meeting.
Besides the Bank of Canada, the loonie has more things to worry about. One of them is a non-stop surge of Covid-19 cases in the United States. This risk is worrying for the CAD due to close ties between the two countries and threats of a new prolonged lockdown in the country of maple trees.
Other macro risks are related to China. Of course, one of them is related to the Hong Kong situation, as the United States can, in fact, impose sanctions on China after the new security bill. Secondly, there is still a lot of uncertainties around the next steps of the US-China trade deal. When will they be fulfilled and how? That’s mostly a rhetorical question for now. One thing that we know for sure is that’s a very big issue driving the risk sentiment across the markets right now and the Canadian dollar as well.
Finally, let’s not forget that the CAD is a commodity currency, heavily dependent on the oil prices. While OPEC+ is considering whether or not to keep the output cuts at the same level, the oil prices remain under pressure. That is, if the alliance agrees to increase the production levels, the oil prices will fall dragging the Canadian dollar down as well.
Scenarios for the pairs
On the daily chart of USD/CAD, we can clearly see the 200-day SMA acting as a support at 1.35. On the upside, the range is limited by 1.3630 (23.6 Fibo level). The BOC needs to express an utterly optimistic or pessimistic tone to break the current range. If the bank is positive, after the breakout of 1.35 we will probably see the retest of June’s low at 1.3355. And if the bank sticks to its cautious stance, the pair will likely continue trading within the range.
This pair is trading sideways, too. The first resistance is placed at 79.5. It’s unlikely for bulls to break this level after the BOC meeting. The risk-off mood may pull the pair below 78.3 and the crossover of 100- and 50- day SMA. The next support will be placed at 77.6.
This pair is an interesting choice. After breaking a range above the long-term resistance at 1.5440, the pair surged towards the next crucial level at 1.5530. The breakout of it will push the pair towards March’s highs at 1.5640. Keep in mind, that the euro is stronger than the Canadian dollar right now. For bears, the correction below 1.5440 to the support at 1.4310 is in focus.
The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…
After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.