USD/CAD bulls eye a move through a 38.2% Fibo, eyes on BoC

• USD/CAD bulls need to get above 1.3460 to break the resistance structure.
• Focus is on the BoC for the week ahead. 
•  There are prospects of a move through the 38.2% ratio into the 1.3560s.

USD/CAD has been holding in familiar ranges with the CAD benefitting from a rise in oil prices while the market assesses the prospects of the Bank of Canada starting up the interest rate hiking campaign again this week. 

Money markets see a roughly 45% chance of the central bank raising rates.  Traders will be waiting today Reserve Bank of Australia closely as well for prospects of a prelude to the event. A surprisingly strong performance from the Canadian economy will make for a tough choice for the central bank´s Governor, Tiff Macklem.

´´We look for the BoC to step off the sidelines with another 25bp hike to 4.75% in June,´´ analysts at TD Securities said:

´´Economic data has remained resilient, and the Bank's conditional pause is looking less tenable without clear evidence of a material slowdown in the first half of 2023.´´

´´We look for a relatively hawkish statement, with the Bank leaving the door open to further tightening in the coming months.´´

Meanwhile, the US Dollar index cut early gains to trade little changed around 104 on Monday. A weaker ISM services print weighed:

 ´´The May ISM Services index fell 1.6pts to 50.3, below consensus of a lift to 52.4. That is the survey’s lowest reading since the initial onset of the pandemic, except for December last year which was affected by severe weather conditions,´´ analysts at ANZ Bank explained. ´´The print will undoubtedly fan expectations that the largest sector of economic activity may finally be responding to Fed tightening.´´  

The Greenback had otherwise enjoyed the Nonfarm Payrolls and a remarkable 339K jobs in May. However, the Unemployment Rate rose by 0.3 percentage points to 3.7% and hourly wage growth slowed. Around 80% of market participants expect the Fed to leave rates steady when it meets next week.

USD/CAD H1 chart

From earlier analysis, Bulls taking control and eye significant correction, it was stated that the price was sideways and bulls need to get above 1.3460 to break the resistance structure. In doing so, there will be prospects of a move all the way through the 38.2% ratio into the 1.3560s.