USDCAD braced for BoC/Fed combo

• Bank of Canada expected to cut rates by 25bp
• Fed also expected to cut rates by 25bp
• USDCAD trapped within range with support at 1.3970 and resistance 1.4060

A super-central bank combo featuring the Bank of Canada and the Federal Reserve could rock the USDCAD on Wednesday, 29th October…

The currency pair remains trapped within a range with resistance at 1.4060 and support at 1.3970.

WHAT TO EXPECT?

Wednesday 29th October

Bank of Canada rate decision – (13:45 PM GMT)

Traders are pricing an 86% probability that the BoC will cut interest rates on Wednesday with a 20% probability of a jumbo 50 basis point cut by December.

It’s worth noting that the Trump administration in August, imposed a 35% tariff on Canadian goods not covered by the USMCA.

In the most recent developments, Trump has announced another 10% tariff, further escalating US-Canada trade tensions.

• The Canadian Dollar is likely to weaken if the BoC cuts rates and signals further rate cuts down the road.

• Should the BoC cut rates but show hesitance in future cuts, this may support the CAD.

Fed rate decision – (18:00 PM GMT)

The Fed is expected to cut interest rates with traders expecting another rate cut by December.

So, all attention will be on Jerome Powell’s press conference for clues on future policy moves in the face of the ongoing US government shutdown.

POTENTIAL SCENARIOS:

BULLISH – Should the 200-day SMA prove reliable support this may trigger a rebound toward 1.4060 and 1.4086 – the upper limit of the Bloomberg FX model.

BEARISH – Weakness below the 200-day SMA could trigger a decline back toward the 50-day SMA at 1.3895.