USD / CAD rate outlook depends on Bank of Canada (BoC) futures


Canadian dollar talking points

USD / CAD transactions in the June range it breaks the formation of ascending channels carried over from the previous monthand the exchange rate may continue to consolidate before the Bank of Canada (BoC) interest rate decision on July 15, as the central bank is expected to maintain current policy.

USD / CAD rate outlook depends on Bank of Canada (BoC) futures

The USD / CAD remains little changed since the beginning of the month due to the limited reaction to the report on employment in Canada, but the update could influence the outlook for monetary policy, the economy creating 952.9K jobs in June after expansion of 289.6K the previous month.

Signs of stronger job growth should keep Bank of Canada (BoC) sidelined The Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (RPM), and the central bank could take a wait-and-see approach in the coming months like ” the Bank expects the economy to resume growth in the third quarter.«

Source: BoC

In turn, updating the MPR can undermine speculation for additional monetary support because ” the Bank reduces the frequency of its forward repo transactions to once a week and its program to purchase bankers’ acceptances for biweekly transactionsAnd an adjustment to the forward forecast for monetary policy could trigger an upward reaction of the Canadian dollar if the BoC shows a greater willingness to reduce its purchases of assets throughout the second half of 2020.

However, more of the same from the BoC can drag the Canadian dollar as Governor Tiff Macklem excludes V-shaped recovery, and the central bank can largely highlight itscommitment to continue large-scale asset purchases until economic recovery is well underway“As the authorities warn”the global recovery will likely be long and uneven.«

Until then, the USD / CAD could continue to consolidate because it breaks the formation of ascending channels postponed from the previous month, with the June range on the radar because the exchange rate remains little changed since the beginning of the month.

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Daily USD / CAD rate chart

Image of the daily USD / CAD rate chart

Source: Negotiation view

  • Keep in mind that the USD / CAD correction of the 2020 high (1.4667) managed to close the price gap from March, the exchange rate decline pushing the relative strength index (RSI) in oversold territory for the first time since the beginning. of the year.
  • However, the RSI failed to maintain the downward trend from May, as the USD / CAD was reversed from the March low (1,3315), the development highlighting a potential change in market behavior as the exchange rate continues to follow the June range.
  • In turn, the USD / CAD could continue to consolidatebecause it breaks the formation of ascending channels after the unsuccessful attempt to test the June high (1.3801), with a lack of momentum to break / close above 1.3610 (61.8% retracement) at 1.3660 (78.6% expansion), pushing the exchange rate towards the Fibonacci overlap around 1.3510 (38.2% expansion) at 1.3540 (23.6% retracement).
  • June range remains on the radar for USD / CAD, but needs a break / close under the region from 1.3510 (38.2% expansion) to 1.3540 (23.6% retracement ) to open the overlap around 1.3440 (23.6% expansion) to 1.3460 (61.8% retracement),the next area of ​​interest being around 1.3290 (61.8% expansion) to 1.3320 (78.6% retracement), which corresponds to the June low (1.3315).
  • At the same time, a break / close above the Fibonacci overlap around 1.3610 (61.8% retracement) to 1.3660 (78.6% expansion) opens the region of 1.3720 (expansion from 78.6%), the next area of ​​interest being around 1.3810 (50% retracement) to 1.3830 (100% expansion), which corresponds largely to the June high (1, 3801).
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– Written by David Song, monetary strategist

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