USD/CAD Outlook Hinges on Financial institution of Canada (BoC) Ahead Steerage

Canadian Greenback Speaking Factors

USD/CAD trades to a contemporary month-to-month low (1.2471) following the failed try to push again above the 50-Day SMA (1.2585), however the Financial institution of Canada (BoC) rate of interest choice could hold the trade price inside the March vary because the central financial institution is broadly anticipated to retain the present course for financial coverage.

USD/CAD Outlook Hinges on Financial institution of Canada (BoC) Ahead Steerage

USD/CAD snaps the opening vary for April as longer-dated US Treasury yields lengthen the decline from the beginning of the month, and the trade price could proceed to present again the rebound from the March low (1.2365) if the BoC adjusts the ahead steering for financial coverage.

The BoC price choice could overshadow the replace to Canada’s Shopper Worth Index (CPI) because the central financial institution is slated to launch the Financial Coverage Report (MPR), and it stays to be seen if the central financial institution will change its tone as “the Governing Council judges that the restoration continues to require extraordinary financial coverage help.”

It appears as if the BoC is in no rush to modify gears as the central financial institution plans to “proceed its QE (quantitative easing) program till the restoration is effectively underway,” and extra of the identical from Governor Tiff Macklem and Co. could generate a bearish response within the Canadian Greenback as officers pledge to “present the suitable diploma of financial coverage stimulus to help the restoration and obtain the inflation goal.”

Nevertheless, the BoC could strike a much less dovish tone following the 303.1K growth in Canada Employment, and the continued enchancment within the labor market could encourage the central financial institution to step by step cut back its emergency measures in 2021 because it instills an improved outlook for development and inflation.

Till then, USD/CAD could proceed to trace the March vary amid the failed try to push again above the 50-Day SMA (1.2585), however the tilt in retail sentiment seems poised to persist as merchants have been net-long the pair since Could 2020.

The IG Shopper Sentiment report exhibits 66.46% of merchants are at present net-long USD/CAD, with the ratio of merchants lengthy to quick standing at 1.98 to 1.

The variety of merchants net-long is unchanged from yesterday and 6.73% greater from final week, whereas the variety of merchants net-short is additionally unchanged from yesterday and 17.99% decrease from final week. The rise in net-long curiosity has fueled the crowding habits as 60.35% of merchants have been net-long USD/CAD final week, whereas the decline in net-short place may very well be a operate of revenue taking habits because the trade price trades to a contemporary month-to-month low (1.2471) forward of the BoC price choice.

With that stated, the failed try to push again above the 50-Day SMA (1.2585) could result in an additional decline in USD/CAD just like the habits seen earlier this 12 months, and the trade price could wrestle to retain the rebound from the March low (1.2365) because it snaps the opening vary for April.

USD/CAD Fee Each day Chart

Supply: Buying and selling View

• The broader outlook for USD/CAD stays tilted to the draw back because it trades to a contemporary yearly low (1.2365) in March, with each the 50-Day (1.2585) and 200-Day (1.2956) SMA’s nonetheless monitoring the destructive slope carried over from the earlier 12 months.
• The Relative Power Index (RSI) highlights the same dynamic because the indicator persistently holds beneath 60, with the oscillator indicating that the bullish momentum could proceed to abate because it fails to retain the upward development carried over from the earlier month.
• The Fibonacci overlap round 1.2620 (50% retracement) to 1.2650 (78.6% growth) seems to be performing as resistance as USD/CAD struggles to push above the 50-Day SMA( 1.2585), with lack of momentum to carry above the1.2510 (78.6% retracement) to 1.2520 (23.6% growth) area bringing the 1.2440 (23.6% growth) space on the radar.
• Subsequent area of curiosity is available in round 1.2360 (100% growth) to 1.2390 (38.2% growth), which traces up with the March low (1.2365), adopted by the overlap round 1.2250 (50% retracement) to 1.2280 (50% growth).

— Written by David Tune, Forex Strategist

Observe me on Twitter at @DavidJSong