USD/CAD analysis and Bank of Canada (BoC) decision preview

The USD/CAD exchange rate rose for the second straight day as traders reflected on the strong US PMI numbers and the upcoming Bank of Canada (BoC) decision. The pair rose to a high of 1.3600, a few points above this week’s low of 1.3480.

The USD to CAD pair reacted to the positive US services and composite PMI data. According to ISM, the non-manufacturing PMI rose from 51.8 in October to 52.7 in November, higher than the median estimate of 52.0. 

Non-manufacturing prices index rose to 58.3, higher than the median estimate of 58.0. A separate report by the Bureau of Labor Statistics showed that the number of job openings dropped from over 9.35 million in September to 8.7 million in October.

These numbers came a day ahead of the latest ADP private payrolls report for November. And on Friday, the BLS will release the latest non-farm payrolls numbers. These numbers are important because the Fed has committed to being data-dependent when making its next interest rate decision. 

Strong jobs numbers could push the Fed to consider at least one more rate hike before eventually cutting them later in 2024. 

The other important USD/CAD news will be the upcoming decision by the Bank of Canada. Economists polled by Reuters believe that the BoC will decide to leave interest rates unchanged at 5.0%.

The BoC is under intense pressure to engineer a soft landing for an economy that is not doing well. The most recent data shows that Canada’s inflation eased to 3.1% in October while core CPI crashed to the lowest point in more than 2 years. Still, these figures are much higher than the BoC target of 2.0%.

I correctly predicted the recent plunge of the USD/CAD pair as you can read here. I cited the fact that it had formed a rising wedge pattern, which is usually a bearish sign. Now, the pair has dropped and moved below the key support at 1.3667, its highest point on April 28th. 

The 100-day and 50-day moving averages have formed a bearish crossover pattern, which is also a red flag. On the positive side, it has come close to the lower side of the Andrews Pitchfork tool, pointing to more upside.

If this happens, the next price to watch will be at 1.3667. A drop below this week’s low of 1.3480 will invalidate the bullish view.

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