By Ketki Saxena
Investing.com -- The Canadian dollar weakened against the greenback to a three week low, ahead of a monetary policy decision from the Bank of Canada tomorrow and as crude prices slid.
Oil prices pared back 2% today after yesterday’s 3% slide, as diplomatic efforts progressed in the Middle East, and a raft of weak European data fanned worries of a global slowdown.
Meanwhile, the Bank of Canada is widely expected to hold interest rates steady at 5%, widening the US-Canada interest rate differential.
While a “hawkish hold” is widely expected, markets will closely parse commentary accompanying the decision, as the Canadian central bank comes under increasing pressure to veer less hawkish as the economy slows and households struggle with high indebtedness.
Analysts at Daily FX forecast that “Any indication that policymakers will prioritize growth over inflation will be negative for the Canadian dollar, reinforcing the U.S. dollar’s bullish momentum in the near term.”
“With the Loonie biased to the downside, it may only be a matter of time before USD/CAD manages to recapture or even surpass its 2023 highs.”
The US dollar meanwhile strengthened against a basket of currencies as US manufacturing PMI came in higher than expected.
On a technical level for the pair, analysts at FXStreet note, “The next immediate barrier for USD/CAD bulls will be October’s early high of 1.3785, while the floor for sellers currently sits at the last swing low near 1.3569.”
“The USD/CAD continues to find technical support from the 50-day Simple Moving Average (SMA) currently lifting into 1.3600.”
“An extended rally will see the USD/CAD set for a challenge of 2023’s highs at 1.3862, while a full bearish reversal will find the floorboards near the 200-day SMA currently parked just south of 1.3500.”