USD/CAD Falls to 1.3819 as Markets Await Crucial BoC Rate Decision and Policy Report

Despite these challenges, the strong U.S. dollar has helped limit USD/CAD’s downside. The Federal Reserve’s steady monetary stance and the possibility of smaller U.S. rate cuts later this year provide a stabilizing factor for the pair. Investors are optimistic about the dollar, which remains resilient even as Canada prepares to lower rates to support its economy.

Tomorrow at 9:45AM EST #BOC may deliver a jumbo rate cut of 50 to 75 basis points, when this happens there will be a dislocation in $DXY, $USDCAD, and bond yields. If you are a #0dte $SPY trader, avoid the first 15 minutes from 9:30 to avoid this RATE shock. $TLT $QQQ $NVDA $VIX https://t.co/NiQDiNJkfn

— Zan (@alshfaw) October 23, 2024

BoC Rate Cut: Economic Challenges in Focus

The Bank of Canada’s decision today is expected to result in a 50 basis point reduction to 3.75%, marking the fourth consecutive rate cut. Canada’s economy has struggled to recover, with unemployment hovering around 6.5%. While the jobless rate has seen slight improvement, it remains significantly higher than the pre-pandemic average of 5%, signaling a labor market that is still under strain.

In addition to unemployment, inflationary pressures have diminished, leaving the BoC in a position where further monetary easing seems necessary. The expected rate cut reflects the need for more stimulus to support spending and economic activity, especially as global demand for Canadian exports remains uncertain.

The release of the BoC’s Monetary Policy Report today will offer deeper insights into the central bank’s outlook for inflation, growth, and future monetary policy moves. This report, alongside the rate cut, will be key in shaping market expectations for the Canadian dollar moving forward.

U.S. Dollar Strength Stabilizes USD/CAD

While the Canadian dollar faces challenges ahead of today’s BoC events, the U.S. dollar remains strong, offering some stability to the USD/CAD pair. With the Federal Reserve expected to begin a gradual rate-cut cycle by the end of the year, the U.S. dollar continues to perform well against its peers.

The Fed is likely to announce a 25 basis point cut in November, followed by another in December, according to the CME FedWatch tool. These anticipated cuts are contributing to the dollar’s strength, which has helped limit USD/CAD’s losses in the face of Canadian economic uncertainty. Investors are also closely monitoring the upcoming U.S. presidential election, with potential impacts on global trade and Canada’s economy.

BoC 🇨🇦 Overnight Rate Decision: October 23, 2024, at 8:45 AM CST

Markets expect a 50-basis-point rate cut from 4.25% to 3.75%, driven by falling inflation. This move could weaken the Canadian dollar.

Currency pairs to watch: #USDCAD #CADJPY

— Purity Anthony (@Mr___apo) October 23, 2024

Daily Technical Outlook: USD/CAD – October 23, 2024

As of Wednesday, USD/CAD is trading at 1.3819, slightly lower ahead of the critical BoC rate decision and Monetary Policy Report release. Immediate resistance is found at $1.3825, with the next resistance levels at $1.3849 and $1.3867. On the downside, immediate support is located at $1.3810, followed by $1.3786 and $1.3747.

The Relative Strength Index (RSI) is currently at 64.12, indicating mild bullish momentum as the pair remains above key support levels. Meanwhile, the 50-day Exponential Moving Average (EMA) at $1.3788 continues to offer solid support.

Key Insights:

• Immediate resistance at $1.3825, followed by $1.3849 and $1.3867.

• Immediate support at $1.3810, with further levels at $1.3786 and $1.3747.

• RSI at 64.12 suggests mild bullish momentum, with a potential for further gains if the BoC rate decision aligns with expectations.

Today’s BoC events will be crucial in determining the next moves for USD/CAD, and market participants should pay close attention to the rate cut announcement and the accompanying Monetary Policy Report.