USD/CAD: BOC ahead
At the end of last week USD/CAD returned to the 1.1050 area, but then drifted higher staying between this level and 1.1120. The swings in risk sentiment actually don’t affect USD/CAD that much. As the mood of the market improved, oil prices went lower (CAD-negative), but risk appetite has recovered (CAD-positive).
The Bank of Canada will announce the result of its meeting today at 15:00 GMT. The change in the benchmark interest rate (currently at 1.00%) is unlikely. According to BMO Capital Markets, although there were some positive developments in Canadian economy (GDP unexpectedly bounced by 2.9% in Q4, while inflation rose to 1.5%), the BOC likes lower CAD and will try to make it say low probably “finding some way to mix the good with the bad” in its statement. This won’t be hard as the economic growth in the first half of 2014 may be weaker than the bank forecast in January. Still CAD may benefit if the central bank softens its deflationary concerns. The risks for USD/CAD from the meeting are to the downside.
Support at 1.1000 will likely hold. Other support levels include 1.1050, 1.1030 and 1.1019. Resistance is at 1.1100, 1.1120/27 and 1.1150. Only above the latter the picture will once again become bullish.