The USD/CAD stabilized near the 10-day moving average ahead of Wednesday’s Bank of Canada meeting. The Bank will meet to decide on monetary policy but no change is widely expected by economists.
The BOC has cut rates twice already this year in response to the disappointing economic activity, yet Canada is still struggling and growth is fragile. The decline in crude oil prices has hurt economic activity especially in the western part of the country. Unemployment has steadily risen over the past year. Last month it stood at 7.1%, which matches the highest level since the end of 2013. It was 6.6% in January.
The new Liberal government’s platform suggests greater fiscal support will be forthcoming. This too may take off some of the residual pressure on the central bank to ease monetary policy further. While many expect the Bank of England to follow the Federal Reserve as the major bank to raise rates, there is beginning to be talk that Canada could be third, but not until 2017.
The currency pair found short term support near the 10-day moving average at 1.2965, with additional support near last week’s lows at 1.2830. Resistance is seen near the breakdown level at 1.3075. Momentum on the currency pair is poised to turn positive as the MACD (moving average convergence divergence) index is about to generate a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.