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Loonie Steady Ahead of BoC Decision at 10am ET

Published October 19, 2016
  • USDCAD is hovering near the 1.3100 handle this morning, posting a slight gain of 0.2% for the Loonie ahead of today's key Bank of Canada interest rate decision at 10am ET
  • Yesterday, Canada reported stronger than expected manufacturing sales for August which have led the market to believe that the Canadian economy could see a rather healthy pop in activity for Q3 following a Q2 contraction driven by the wildfires in Alberta
  • GDP projections have been raised by most of the big five banks with many expecting growth of 3.6%, slightly below the BoC's base case of 3.7% 
  • It should be noted that despite the acceleration in August manufacturing sales, year-to-date figures are not that impressive, coming in at a mere 1.1% thus far
  • The BoC is expected to hold rates at 0.5% this morning and deliver a rather dovish statement along with lowered economic projections
  • The market is priced for this scenario and thus upside risk in USDCAD is probably limited and would require Poloz and friends to strike a definitively dovish tone; they will be holding a press conference at 11:15am ET and appearing before the Senate Banking Committee at 4:15pm ET so there is ample opportunity for this to happen 
  • Support for USDCAD comes in at the 100 day moving average of 1.3025, and then the 1.3000 handle should attract some bids ahead of trend line support in the mid 1.2900's
  • Resistance is seen at 1.3170, which is the 200 day moving average, followed by multiple highs and a large retracement level in the 1.3300 – 1.3313 area
  • Crude continues to saunter higher – WTI prices up by 1% this morning to $52.16 – as optimism surrounding an OPEC agreement in November and strong demand from China support prices
  • The EIA reports crude inventories at 10am ET and the market is looking for a build of 2.7M barrels during the past week; if this turns out to be a draw then we could see the Loonie catch a bid following the release, especially if the BoC statement is less dovish than expected
  • Lots to consider this morning for USDCAD traders so as always, prepare as best you can

Charts: (1) USDCAD holds steady between its 200 and 100 DMA's (blue/red respectively). (2) Fed Rate Hike Odds. (3) Economic Calendar.