Investing.com – The Canadian dollar edged higher against its US counterpart today, supported by an uptick in crude prices and risk-on sentiment.
However, gains were modest as investors await a Federal Reserve policy decision and domestic GDP data tomorrow.
Analysts at Scotiabank (TSX:BNS) note that, “Positive risk appetite is supporting the CAD while narrower US/ Canada spreads, particularly in the 5Y and 10Y sectors of the curve, are adding to CAD tailwinds.”
“Given those factors, the outcome of the Fed policy meeting tomorrow will determine whether CAD gains have any staying power or not.”
The expectations are for a rate hold but dovish tilt from the Fed tomorrow. Traders will be parsing commentary for clues on whether the Fed could cut rates in March.
Canadian GDP data meanwhile is likely to do little to move the needle.
The Canadian economy is expected to have grown by 0.1% month over month in November, and the Bank of Canada is expected to shift to rate cuts as the economy sputters.
On a technical level for the pair, analysts at FXStreet note that “the USD/CAD continues to drift into the low side as the pair grapples with a bearish crossover of the 50-day and 200-day Simple Moving Averages (SMA), pricing in a near-term technical ceiling near the 1.3500 handle.”
“A continued drag down will see the USD/CAD crack through 1.3400 to make a fresh run at the last swing low near December’s bottom bid of 1.3177.”