The Canadian Dollar is down by 0.2% against the US Dollar but remains stronger than other G10 currencies. This change comes as markets get ready for the Bank of Canada (BoC) policy decision on Wednesday, where they are expected to keep rates steady at 2.75%. The BoC is slightly cautious due to worries about trade and global growth. However, strong signs of persistent inflation and a resilient domestic economy, like the good employment figures from June, help balance things out.

USDCAD Trading Range

USD/CAD has been trading steadily since early June. Support is currently below 1.3600 while resistance is above 1.3750. The Relative Strength Index (RSI) is at 50, showing limited momentum, but recent gains suggest there might be a break above the 50-day moving average at 1.3697. For the near future, traders should watch for support below 1.3680 and resistance above 1.3780. These levels are crucial for tracking the currency pair’s movements and potential market changes. We advise derivative traders to focus on the upcoming policy decision as a key market driver. The central bank is expected to keep its main interest rate at 5.00% after being the first G7 country to cut rates in June, which supports the slightly cautious outlook due to global growth concerns.

Traders Strategy Insights

The case for keeping rates steady is mixed, presenting opportunities for traders. In May, Canada’s headline inflation decreased to 2.9%, falling within the target range and promoting a patient approach. However, the job market showed some weakness, as the unemployment rate rose to 6.2% despite a slight increase in jobs. Given the stable trading range of the currency pair and a neutral RSI, we suggest considering strategies that could benefit from a potential breakout. Buying a strangle or straddle with options expiring shortly after the announcement could take advantage of expected volatility. Usually, policy announcements lead to sharp movements after periods of consolidation. For traders with a specific outlook, key levels should guide their strategies. A surprising dovish statement might push the pair towards resistance above 1.3780, favoring long calls. Conversely, any unexpectedly hawkish remarks emphasizing inflation could lead the pair to test support below 1.3680, making put options more appealing. Create your live VT Markets account and start trading now.

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