USDCAD currency pair is expected to enjoy elevated volatility today around 3:00 pm BST. ISM manufacturing index for May will be released and is expected to show a slight deterioration, from 55.4 to 54.5. However, this release is likely to be overshadowed by another event that is scheduled for the same hour - Bank of Canada rate decision. Canadian central bank is expected to deliver a 50 basis point rate hike. This would be the third rate hike in a row and the second straight 50 bp rate hike. If those expectations are met, main interest rate in Canada will return to pre-pandemic level of 1.50%.
A 75 basis point rate hike looks unlikely as recent comments from BoC members weren't supportive for the idea and deteriorating macroeconomic environment may make them even more prudent. The Bank is likely to signal that rates will need to rise further to help control inflation. The main question is whether BoC plans to continue with a 50 basis point rate hike or will switch to 25 bp moves.
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Open account Try demo Download mobile app Download mobile appTaking a look at USDCAD chart at D1 interval, we can see that the pair has pulled back considerably over the past 3 weeks. USDCAD is currently testing a support area in the 1.2650 area that is marked with 200-session moving average and 61.8% retracement of the upward impulse launched in early-April. This is an important technical spot and today's BoC decision is likely to be a make-or-break for the pair. Statement hinting that rate hikes will continue at current pace and magnitude could greatly support CAD and push the pair below the zone.
Source: xStation5
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