USD/CAD: Bullish impulsive above 1.2500 hinges on BOC announcements
- USD/CAD prints three-day updates, mildly bid of late.
- Broad US dollar strength, WTI pullback adds to the pre-BOC cautious mood to favor bulls.
- BOC may keep benchmark rates unchanged but can continue on bond purchase tapering.
- Fed’s Powell, covid updates become important too.
USD/CAD picks up bids to 1.2521, up 0.05% intraday, amid Wednesday’s Asian session. The Loonie pair jumped the most in over a week the previous day on broad US dollar strength but cautious sentiment ahead of the Bank of Canada (BOC) monetary policy decision seems to probe the bulls of late.
Mainly behind the up-moves was the strong US Consumer Price Index (CPI) data for June. The headline inflation data rose past 4.9% expected to 5.4% YoY while the core reading was also upwardly revised from 3.8% to 4.5%.
Also favoring the USD/CAD buyers were the coronavirus (COVID-19) variant concerns. The US policymakers jostle over the need for a third vaccine shot whereas the UK prints the highest covid-led death toll since April. In Canada, the earlier badly hit British Columbia (BC) marks no covid-led deaths and 33 cases on July 13.
While Canadian economics have recently been speaking loud of the positive transition off the pandemic, the scenario seems different elsewhere. The same push the BOC to consolidate the monetary easing and stay ahead of the curve.
Amid these plays, S&P 500 Futures remain depressed around record top, following Tuesday’s mildly downbeat performance, whereas the US 10-year Treasury yields pause after a three-day run-up near 1.41%.
Moving on, the BOC isn’t expected to alter the benchmark rate of 0.25% but could taper the weekly bond purchase to C$2 billion. While the same is already being expected, USD/CAD traders will keep their eyes on the BOC Governor and Senior Deputy Governor’s press conference, around 15:00 GMT, for fresh impulse.
Read: Bank of Canada Preview: QE taper to pave the way for a stronger CAD
Technical analysis
USD/CAD buyers struggle between descending resistance lines from late January and December 21, 2020, respectively around 1.2435 and 1.2545-50. However, bears are less likely to take risk of entry until the quote stays beyond a six-week-old rising support line, near 1.2365.