USD/CAD Forecast: Watch BoC decision For Some Clues

The USD/CAD pair got some positive momentum on Tuesday to rise above the 1.2100 level, and the positive move was supported by the modest strength of the US dollar. However, crude oil prices supported the commodity-linked Canadian dollar and acted as a buffer to any quick rally. Investors remain concerned about rising inflationary pressure that may force the Federal Reserve to start discussing reducing its asset purchases soon.

On the other hand, the Canadian dollar found support from higher oil prices; WTI rose above the fundamental 70.00 level for the first time since October 2018 with signs of strong demand for fuel. Meanwhile, the prospect of Iranian supplies returning to the market faded after the US Secretary of State stated that sanctions against Tehran would remain in place.

It is worth noting that the Bank of Canada was the first central bank to reduce pandemic stimulus programs at the April meeting, with a directive to raise the first interest rate in the second half of 2022, which prevented investors from placing strong bets while awaiting the Bank of Canada’s decision on monetary policy today, Wednesday. Official Crude Oil from the US Energy Information Administration may have an effective impact on some trading opportunities.

CAD Technical

The pair as of writing is swinging in the range of the last month and forming a rectangle which is a continuation pattern representing a short stop. The inability of the pair to record any recovery from its lows indicates that the bearish trend in the near term remains valid for a more extended period. Still, the continued strength outside the trading range, around the 1.2135-45 area, may lead to a short-covering movement that pushes the pair to regain the 1.2200 level. Some buying after that may push the pair towards breaking the support 1.2265, which has become a resistance level.

On the other hand, the weekly bottom around the 1.2060-55 area guards the bearish trend and the failure to defend the mentioned support opens the door to a decline towards a major key 1.2000 and a break below paves the way towards the 2015 lows, around the 1.1920 area.