USD/CAD Price Analysis: Markets Predict a BOC Rate Hike

USD/CAD Price Analysis: Markets Predict a BOC Rate Hike

On Tuesday, the Canadian dollar reached a nearly four-week high against the greenback.

  • Money markets estimate approximately a 45% probability of the BOC raising rates.
  • Investors expect the Fed to hold rates at the next meeting.

Today’s USD/CAD price analysis is bearish. The Canadian dollar hovered near an almost four-week high against the greenback.

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Investors predicted the Bank of Canada would resume its tightening campaign during the interest rate decision on Wednesday or in the coming months. 

Notably, this strengthening of the Canadian dollar followed the unexpected decision by the Reserve Bank of Australia to further increase interest rates. 

Money markets estimate that there is approximately a 45% probability of the Canadian central bank raising its benchmark rate on Wednesday. This comes after maintaining it at a 15-year high of 4.50% since January. Furthermore, the market fully expects a rate hike by the next meeting in July.

Despite the US dollar gaining against major currencies and a decline in oil price, which is a significant export for Canada, the Canadian dollar still rose. 

Furthermore, the Canadian dollar managed to overcome negative economic data. In April, Canadian building permit values experienced a larger-than-expected decline of 18.8%. Additionally, the Ivey PMI indicated that economic activity grew at the slowest pace in three months.

Meanwhile, the dollar showed signs of instability as the anticipation of a hike by the Federal Reserve next week diminished. 

The prevailing belief in money markets is that the US central bank will maintain interest rates at their current level during its upcoming policy meeting. Nevertheless, there are some expectations for the Fed to implement another rate hike later this year.

USD/CAD key events today

Investors are eagerly awaiting the Bank of Canada policy meeting. There are growing expectations that the BOC will resume rate hikes.

USD/CAD technical price analysis: Bears maintain control yet exhibit signs of weakness.

USD/CAD technical price analysis
USD/CAD price analysis chart

The bias for USD/CAD on the 4-hour chart s bearish. The price trades below the 30-SMA, and the RSI points to strong bearish momentum under 50. However, the price is consolidating lower, which could mean weakness in the downtrend.

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If bears can keep control, the price will likely fall to retest the 1.3351 support level. However, if this weakness allows bulls to return, we could see the price push above the 30-SMA to retest the 1.3501 key resistance level.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.