USD/CAD

• Loonie continues to mount gains against the US Dollar heading into BoC rate decision.
• USD is extending its drop against the CAD from mid-March.

The USD/CAD lifted slightly in the overnight session, trading into 1.2570 ahead of the European markets.

Bank of Canada Preview - What to Expect for USD/CAD

Tuesday saw a continuation of the bearish bias for the USD/CAD, and eyes are turning to the Bank of Canada's Rate Decision at 13:00 GMT today

. As Kathy Lien noted, "No policy changes are expected but the Canadian dollar's price action tells us that investors are looking for positive comments from the central bank. A lot has changed since their last meeting in March. Six weeks ago, they expressed concerns about lower wage and household credit growth but since then, oil prices hit a 3 year high, retail sales rebounded, the unemployment rate declined, job growth accelerated, housing market activity improved, inflation increased and manufacturing activity expanded at healthy rate. Both U.S. President Trump and Canadian Prime Minister Trudeau have said they are close to reaching a NAFTA deal and according to Mexico's Economy Minister, the negotiation team could meet again on Thursday in Washington to start working on their issues again and hopefully move the process forward. The bottom line is that the BoC has less to worry about especially after the uptick in the business sentiment. According to the central bank's own survey of executives, expectations for future sales improved with companies seeing continued signs of healthy sales, capacity constraints and labor pressures. Hopefully this will alleviate one of the BoC's concerns about wage growth."

USDCAD may extend near-term consolidation; picture remains firmly bearish

USD/CAD Levels to watch

As Slobodan Drvenica stated earlier in his technical analysis in the run-up to the BoC's rate decision, "The pair is holding in a downtrend from 1.3124 (19 Mar peak) and currently riding on the third wave of five-wave cycle from 1.3124, which cracked its FE 123.6% at 1.2559 and eye next significant support at 1.2513 (FE138.2%) and could travel to 1.2440 (FE 161.8%). Near-term action is holding within narrow congestion between 1.2541 and 1.2623 which extends into the fifth straight session. Consolidation range is capped by descending 200SMA (1.2624) which weighs along with multiple MA’s bear-crosses and thick daily cloud above, keeping strong bearish bias. Consolidation may extend before bears resume, with 200SMA/ daily cloud base, expected to cap."