CAD in focus ahead of the BoC meeting

It is a big week ahead for global FX markets as investors watch several central bank decisions for some direction on key FX pairs.

Source: Bloomberg

There will be plenty of nervousness around the ECB meeting on Thursday and markets seem to have fully priced in aggressive action. Apart from the ECB, we also have the BoJ, BoC and BoE to look out for.

In fact, one of the pairs I’m watching closely at the moment is USD/CAD, which has been trending higher since July last year. The pair bottomed at around $1.0621 and is now trading at around $1.2000.

During the time, US tapering talk followed by tightening have been the dominant themes on the greenback side. For the CAD, the impact of turmoil in oil prices has been relentless and this continues to unravel.

Analysts are now expecting the BoC to be cautious on growth and inflation projections, with language likely to show uncertainty about the future of rates.

In terms of price action, USD/CAD is just sitting under the $1.2000 barrier but could be gearing up for a squeeze higher as the momentum remains strong. I will be looking at dips into $1.1800 for potential buying opportunities as the RSI suggests the pair is slightly overbought.

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