- Stronger US Dollar keeps boosting USD/CAD to the upside.
- Despite the rally, the pair remains in the range, below key resistance.
The USD/CAD pair rose further during the American session and printed a fresh daily high at 1.3496. It is holding near the top, consolidating strong daily gains but still below the 1.3500 zone.
From a technical perspective, the pair continues to trade in a wide range, limited to the upside by 1.3500 on a daily basis and by 1.3520 intraday. A daily close clearly above 1.13500 would point to further gains. On the flip side, the key support emerges at 1.3400 with a close below signaling more losses.
The main driver has been a stronger greenback that extended the rally during the second half of the American session. The DXY is up 0.35%, slightly below 98.00. Risk aversion favored the demand for the greenback, despite the decline in US yields. The 10-year fell to 2.26%, the lowest since September 2017.
The Loonie is the worst performer among commodity currencies ahead of the Bank of Canada meeting on Wednesday. The interest rate is expected to remain unchanged at 1.75%. The statement should be the key driver if there are no surprises.
“The forward-looking language should be unchanged, with a focus on household spending, oil markets, and global trade uncertainty. The apparent deterioration in US/China relations should feature prominently, but the Governor’s constructive comments on the labour market tilt the balance of risks towards a more optimistic statement“, wrote TDS analysts.
They see that prevailing ranges should hold in USD/CAD and they prefer to fade the extremes rather than expect a breakout. “Still, we think the BoC has dropped the bar low enough where the meeting will continue to reinforce highs near 1.3520.”