USD/CAD soared to its highest levels since October 11th in early trading on Wednesday. The Canadian dollar has been pressured by the dovish stance of the Bank of Canada (BoC) and weaker oil prices. Meanwhile, the US dollar has been supported by hopes of a resolution to the US/China trade war.
BoC Statement
On October 30th, the Bank of Canada kept rates on hold at 1.75%, but in a dovish statement cut its domestic and global growth forecasts. BoC Governor Stephen Poloz is scheduled to speak on Thursday at the Asia Economic Policy Conference (AEPC) in San Francisco, where investors will be looking for clues on interest rate policy.
Declining Oil Prices
The Canadian dollar and crude oil have a strong positive correlation, because Canada is among the world’s leading oil producers. This week, falling crude oil prices have weighed on the Canadian dollar, especially in the absence of Canadian economic releases on the calendar.
Trump Speech
US President Donald Trump’s speech at the Economic Club of New York on Tuesday offered little clarity on trade negotiations with China and when a Phase 1 deal might be signed. However, President Trump said China is "dying to make a deal" and that it could happen soon, which boosted both stocks and the US dollar.
Technical Outlook
Looking at the daily chart, we can see that USD/CAD has risen sharply since October 29th and is nearing the ‘line in the sand’ 200 period simple moving average. Beyond the 200 period simple moving average, potential resistance lies overhead at the level of the prior highs of 1.3345.
