Canadian dollar traders are expecting significant volatility in the pair today once the New York session opens, with both key U.S. inflation data and the latest rate decision from the Bank of Canada due out. Any notable deviation from the expected 0.3% month-on-month increase in the U.S. data could drive substantial movement on the dollar side of the equation. Additionally, most traders anticipate market reactions to the Bank of Canada’s decision, regardless of the outcome.
The Bank of Canada is set to cut interest rates by a further 0.5% later today, bringing the key rate down to 3.25%. The unemployment rate has risen to 6.8% over the past month—its highest level since January 2017—which many market participants believe justifies the larger rate cut. However, some still consider a smaller 25-basis-point cut a possibility, which could lead to some strength in the Canadian dollar (commonly referred to as the “loonie”).
USDCAD is currently sitting just below the multi-year highs reached in recent days. Some traders are looking for a “perfect storm” scenario, with a strong U.S. inflation number combined with a 50-basis-point cut from the Bank of Canada, to push the pair to fresh highs. Conversely, if these expectations are not met, the pair could retreat into recent ranges. What seems certain, however, is that the coming sessions will see strong market movements.
Resistance Levels:
- Resistance 2: 1.4667 – 2020 High
- Resistance 1: 1.4195 – 2024 High and Trendline Resistance
Support Levels:
- Support 1: 1.3998 – Trendline Support
- Support 2: 1.3710 – 200-Day Moving Average
