USD/CAD is shaping up for a retest of the 1.3405/10 area – Scotiabank

USD/CAD is trading little changed ahead of the BoC policy decision. In the meantime, charts turn mildly bearish for the pair, economists at Scotiabank report.

BoC expected to leave its policy rate unchanged

“No change in policy is expected. Even though the bar to higher rates remains high in Canada, the economy is still running quite hot (hotter than policymakers expected), meaning it is too soon to sound the “all clear” on the inflation fight. The policy statement is likely to reaffirm that the Bank is prepared to raise the policy rate further, if needed.”

“US/Canada 2Y cash bond spreads reached +75 bps in early Mar but have narrowed to around 25 bps currently. A further narrowing in spreads will be modestly CAD-supportive, at least.”

“A ‘doji’ candle Monday and net losses for the USD on the day yesterday confer a negative look on the daily chart and allow for a pickup in USD-negative trend momentum.” 

“The charts suggest spot is shaping up for a retest of the 1.3405/10 area. Below here targets 1.33.”

“Resistance is 1.3525/50.” 

See – BoC Preview: Forecasts from eight major banks, staying on the sidelines