USD/CAD fades recovery moves above 1.2800 with eyes on BOC
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USD/CAD fades recovery moves above 1.2800 with eyes on BOC

  • USD/CAD snaps two-day winning streak to ease from 1.2825.
  • Risks remain mildly positive amid US stimulus hopes.
  • BOC is widely expected to keep monetary policy intact, comments over QE should be observed closely.

Having gradually risen to 1.2825, USD/CAD eases to 1.2815 during Wednesday’s Asian trading. In doing so, the loonie pair declines for the first time in the week even as risk catalysts stay upbeat. The reason could be traced from the pair’s traders cautious sentiment ahead of the Bank of Canada (BOC) monetary policy meeting.

Global market sentiment remains cautiously optimistic as the US policymakers are finally inching closer to the much-awaited coronavirus (COVID-19) stimulus. While House Speaker Nancy Pelosi recently conveyed optimism relating to the talks, US Treasury Secretary Steve Mnuchin put forward a higher than the earlier proposal of $908 billion to $916 billion figure for the aid package.

The COVID-19 vaccine distribution in the UK and likely approval of Pfizer’s vaccine by the Canadian authorities this week also add to the risk-on mood. However, fears of a no-deal Brexit and the surge in the US virus infections and death toll to the record high probe the bulls.

Even so, S&P 500 and Nasdaq refreshed record highs while the US 10-year Treasury yields remain sluggish around 0.92% by the end of Tuesday’s North American trading.

Elsewhere, oil prices remain downbeat for the third consecutive day even as the industry inventory data from the American Petroleum Institute (API) eased below 4.146M prior to 1.141M during the week ended on December 04. Oil is Canada’s key export and hence has a notable impact on the USD/CAD prices.

Looking forward, the BOC is likely to keep the benchmark interest rate at 0.25%, with weekly Quantitative Easing (QE) be a minimum of $4 billion. However, comments over the economic transition and the length of the asset purchase will be the key to watch for the USD/CAD traders.

Technical analysis

Unless crossing a falling trend line from September 01, at 1.2900 now, USD/CAD traders can’t ignore the possibilities of witnessing a fresh low under 1.2800.


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