- USD/CAD nears 1-month highs, halts 3-day uptrend.
- Mixed sentiment keeps the US Dollar on center stage, WTI Crude Oil fades bounce off yearly low.
- The BOC is expected to announce a 0.50% rate hike, clues to the end of the tightening cycle will be crucial for clear guidance.
USD/CAD is rising around 1.3660 even as traders in the Loonie pair are getting cautious ahead of Wednesday’s Bank of Canada (BOC) interest rate decision. In doing so, the quote remains on the sidelines after rising for the past three consecutive days to reach the highest levels in a month.
The reason for the rise in the USD/CAD pair may have to do with the market rush into the US dollar amid fears surrounding the global economic slowdown. Lower prices for Canada’s main export, WTI crude oil, could also weigh on the loonies.
That said, WTI Crude Oil is printing a four-day downtrend around the yearly low posting a 0.30% intraday loss near $74.25 at the latest. The weakness in black gold is easily attributed to the strengthening US dollar and economic fears.
Elsewhere, the US Dollar Index (DXY) extends the early-week rally from the five-month low as top executives at major US banks raised fears of a global economic slowdown. Among them were US executives from Goldman Sachs, Bank of America Corp and JPMorgan Chase. Additionally, Bloomberg Economics also forecast the weakest economic growth since 1993, at 2.4% for 2023.
It should be noted that the optimism surrounding China is challenging the USD/CAD bulls. China is set to ease its three-year-old Zero-Covid policy on Wednesday, according to Reuters, which in turn could trigger risky sentiment and weigh on the U.S. dollar. Beijing’s latest move could be linked to virus infections falling from record highs, as well as multiple announcements suggesting greater unlocking of the virus-hit economy that is the world’s second-largest.
While depicting the mood, the S&P 500 Futures is posting slight gains near 3,950 while 10-year US Treasury yields cling to 3.54% after bearish performance yesterday by Wall Street and majors. Treasury bond yields.
Looking ahead, light timing and mixed sentiment, not to mention pre-BOC anxiety, may limit USD/CAD moves. However, China’s trade numbers and the aforementioned risk catalysts might entertain traders.
It should be noted that the BOC is expected to announce a 50 basis point (bp) hike in its benchmark interest rate. However, USD/CAD bulls will be more interested in the end of the tightening cycle.
Also read: Bank of Canada Snapshot: The end of the tightening cycle is fast approaching
Technical analysis
A sharp upside break of the 50-DMA and a two-month-old descending trendline near 1.3570 and 1.3535 respectively keep USD/CAD buyers hopeful ahead of the key event.
