USD/CAD Forms a Cup and Handle Ahead of BoC Decision
The USD/CAD price held steady on Tuesday as investors waited for the upcoming interest rate decision by the Bank of Canada (BoC). The pair rose to a high of 1.3170, which was much higher than last month’s low of 1.2724.
Bank of Canada rate decision
The USD/CAD price has been in a strong bullish trend in the past few days as focus shifts to the BOC decision. Analysts believe that the bank will deliver another big interest rate hike as it continues to deal with the soaring inflation. Precisely, they expect that the bank will deliver a 75 basis-point increase and bring the official rate to 3.25%.
If this happens, it will be the biggest rate increase in decades. It will also push the headline rate to the highest point since 2008 before the Global Financial Crisis (GFC). It will also be the fifth rate increase this year.
Like other major central banks, the Bank of Canada is fighting to contain the soaring inflation. Data published in August showed that the headline consumer price index surged to an uncomfortable high of 7.6% in July. This price is almost 4 times the BOC target of 2%. In a statement, a Bloomberg analyst said:
“Activity is moderating, particularly in rate-sensitive housing. But inflation is still far too high for comfort, particularly core measures, ahead of potential supply disruptions emanating from Europe or China this winter. As a result, we still see hikes of 50 bps in October and 25 bps in December.”
The USD/CAD price will also react to the latest Canada trade numbers that will come out on Wednesday. Analysts believe that the country’s exports rose in July, helped by the huge external demand for oil and gas. Canada will also publish the latest Ivey PMI data that is expected to show that business activity continued to contract in August.
The four-hour chart shows that the USD/CAD exchange rate has been in a bullish trend in the past few weeks. Along the way, the pair formed a cup and handle pattern, which is usually a sign of bullish continuation. The recent consolidation is part of the handle pattern. It has also moved above the 25-day and 50-day moving averages.
Therefore, the pair will likely continue rising as bulls target the next key resistance level at 1.3250. Learn more about how to send USD to CAD.