The Bank of Canada (BOC) is up so you best believe USD/CAD is on our radar today!
Will the central bank’s decision break USD/CAD from its weeks-long range?
Before moving on, ICYMI, yesterday’s watchlist looked at a potential 500-pip move in case GBP/USD busts out of its triangle consolidation. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
S&P Case-Shiller home price index slows down for a fourth consecutive month in August
US CB consumer confidence dips from 107.8 to 102.5 in OctoberAPI crude oil stocks beat with 4.5M barrel increase vs. 200K uptick seen in the week ended Oct 21
Chinese state-owned banks sold USD in both onshore and offshore markets – Reuters
Australia’s annual inflation races from 6.1% to 32-year high of 7.3%, sounds rates alarm
RBA’s trimmed mean CPI jumped from 4.9% to 6.1%, much higher than RBA’s 2% – 3% target
ANZ’s survey shows drop in business confidence and activity levels – but inflation expectations have risen again
Stocks rise in Asia on hopes of slowing rate hikes
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.S. goods trade balance at 12:30 pm GMT
BOC’s monetary policy decision at 2:00 pm GMT
U.S. new home sales at 2:00 pm GMT
U.S. EIA crude oil inventories at 2:30 pm GMT
BOC’s presser at 3:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: USD/CAD
It’s been a “bad news is good news” kind of week so far for risk currencies as shaky/mixed earnings reports from around the world are pointing to major central banks slowing down their interest rate hikes to avoid “overtightening.”
In USD/CAD’s case, falling U.S. Treasury yields and a slight recovery in risk sentiment and oil prices have helped keep the pair inside a range that had formed after a strong September upswing.USD/CAD is now trading closer to the 1.3550 minor psychological handle that’s just above the weeks-long range on the chart.
Will the range hold for another day? Or is USD/CAD due for a reversal?
If the BOC raises its interest rates by 75 basis points today, then traders who had only priced in a 50bps rate hike could jump on the CAD-buying train and drag USD/CAD lower.
USD/CAD could extend its October downswing and breach the 1.3500 – 1.3550 support zone.
Of course, markets could still go back to buying the safe-haven USD.
If markets turn risk averse after the big earnings misses this week, or if traders go back to pricing in more rate hikes from the major central banks, then USD/CAD could go back to its uptrend.
USD/CAD could bounce from the 1.3500 zone and head for the 1.3800 previous resistance level.