USD/CAD: BoC meeting eyed 26 Jan, hawks can hamstring bullish correction

• USD/CAD bulls could emerge for a run towards 1.2580 and 1.26 the figure. 
• BoC sentiment and CPI data will be key drivers for this month. 

USD/CAD is under pressure at the start of the week and technically, a thrust to the upside could be on the cards once the imbalance of price has been fully mitigated to the downside. At the time of writing, USD/CAD, at 1.2536, is down some 0.13% after sliding from a high of 1.2557 to a low of 1.2535. 

The loonie has been in favour in recent days following a break of a number of daily structures to finally trade below 1.2620 to put in a low of 1.2453 last week. Since then, the price has been correcting the bearish impulse as the US dollar catches a safe haven and Fed driven bid. 

A thorn in the side of the CAD is down to the Covid situation in Canada which is rather quite serious. The strict measures to try and curb the spread of the new variant, Omricon, will inevitably weigh on the growth outlook between members of the board at the Bank of Canada.

BoC in focus

However, the market’s tightening expectations for the Bank of Canada remain broadly intact. The economy was strong before the fresh wave of the virus and there is optimism that this variant is not as lethal as prior variants of the disease.

The BoC will meet on the 26 January, so leading up to this, the Consumer Price Index figures for December will be key. These are expected to show another slight increase in headline inflation, which would be expected to drive further demand for the currency, so long as oil prices can remain elevated. 

USD/CAD technical analysis

Meanwhile, as per the prior technical analysis at the start of the Asian session, USD/CAD Price Analysis: The hourly 61.8% golden ratio is eyed for the opening sessions, the price is drifting lower into the prior resistance and towards a 61.8% Fibonacci retracement near 1.2530. 

1.2580 will be eyed as a day trading target for the European and US sessions if the bulls emerge at a discount for a test of a deeper correction the daily time frame towards 1.26 the figure. If, however, the 1.2530s give out in a significant way, a 4-hour close below 1.2520 for instance, then the focus will be on a restest of 1.25 the figure and 1.2480 for the days ahead.