Monday saw the loonie finish little changed against its US counterpart, anchored around Friday’s five-week low of 1.3132. The USD/CAD traded in a tight range between 1.3075 and 1.3126 as crude oil futures were flat, Iraq has now surpassed Canada as the world 4th largest oil producer. The loonie continues to be weighed down by a combination of European political uncertainty, global equity market declines and escalations in the US-China trade dispute.
As we discussed yesterday, last week’s weak macro data out of the domestic economy places further impetus on this week’s monetary policy decision by the Bank of Canada. We explained that this is the critical risk event this week for the loonie with traders eager to see how the central bank will respond to the weaker than expected releases. Markets are currently pricing a 25bp rate hike at a 90% probability with the accompanying press conference and the introduction of the first Monetary Policy Report likely to be of crucial interest to markets.
We’ve seen our USD/CAD technical levels lift slightly overnight, with downside supports now evident at 1.3071 and topside resistance levels seen around the 1.3157.