USD/CAD advances towards 1.3700 ahead of US data and BoC policy meeting

  • USD/CAD rises ahead of BoC interest rate decision and US ISM employment and services PMI data.
  • The BoC is universally expected to cut interest rates by 25 basis points to 4.75%.
  • US data will influence Fed rate cut prospects for September.

The USD/CAD pair rises towards the round resistance level of 1.3700 in the European session on Wednesday. The USD/CAD pair rises ahead of the Bank of Canada’s (BoC) interest rate policy decision, in which it is expected to announce a 25 basis point (bps) rate cut decision. This would be the BoC’s first dovish interest rate decision after maintaining hawkish rhetoric for more than two years.

In the last six meetings, the BoC kept interest rates stable at 5%. The BoC maintained the status quo as policymakers were not convinced that inflation would sustainably return to the desired rate of 2%.

The reason behind the strong speculation that the BoC will begin to reduce interest rates is the decline in the central banks’ preferred measure of inflation, which is the core Consumer Price Index (CPI), to 1.6% in terms interannual. Additionally, cooling labor market conditions are driving expectations that the BoC will pivot toward policy normalization. Canada’s unemployment rate rises to 6.1%, above the 5% threshold.

Meanwhile, the slight strength in the CAD asset is also driven by further recovery in the US Dollar (USD) ahead of the US ISM Services PMI and ADP employment data for May, due to be released in the American session .

The ADP agency is expected to show that new private payrolls were 173,000, down from 192,000 in April. The services PMI, which measures activity in the services sector that accounts for two-thirds of the economy, is estimated to have returned to expansion, seen at 50.5, up from the previous release of 49.4. The economic data will influence market speculation that the Federal Reserve (Fed) will begin reducing interest rates starting with the September meeting.

USD/CAD

Summary
Latest price today 1.3684
Today’s daily change 0.0008
Daily change % today 0.06
Today’s daily opening 1.3676
Trends
SMA20 Journal 1,366
SMA50 Daily 1.3663
SMA100 Journal 1.3583
SMA200 Journal 1.3576
Levels
Previous Daily High 1.3699
Previous Daily Low 1.3621
Previous Weekly High 1.3735
Previous Weekly Low 1.3615
Previous Monthly High 1.3783
Previous Monthly Low 1,359
Daily Fibonacci 38.2% 1.3669
Daily Fibonacci 61.8% 1.3651
Daily Pivot Point S1 1.3631
Daily Pivot Point S2 1.3587
Daily Pivot Point S3 1.3553
Daily Pivot Point R1 1,371
Daily Pivot Point R2 1.3744
Daily Pivot Point R3 1.3788

Source: Fx Street

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