USD/CAD: Back to the 1.3050 area ahead of BoC

• Calm session across financial markets amid US holiday. 
• Bank of Canada politic meeting on Tuesday in focus. 

The USD/CAD pair found resistance at 1.3070 earlier today and dropped to 1.3042 during the American session, reaching a fresh daily low. It is hovering around 1.3050, stuck in a range, between 1.3080 and 1.3040. 

The mentioned range has been in place since January 10. Over the next hours, USD/CAD is expected to continue to trade sideways near 1.3050, as market conditions favour limited price action. Wall Street is closed on Monday for the Martin Luther King Jr. Day. 

On Tuesday the mentioned range will likely be challenged considering that the Bank of Canada (BoC) will have its policy meeting. Market consensus point to the BoC keeping policy unchanged.  “We believe the balance of risks for the loonie is tilted to the downside ahead of tomorrow’s rate announcement and that a downward revision in the Bank’s GDP forecasts may prompt markets to bring forward their cut expectations”, explained ING analysts. They have a constructive view on CAD in the longer term and see that a one-off cut in the next few months would not dent such an advantage. 

ING analysts warn, however, that their view on the BoC makes them believe USD/CAD will struggle to consistently trade below 1.30 in the near term, also on the back of an uninspiring oil outlook.

Technical levels