Canadian Dollar remains the strongest one for the week, with help from further rebound in oil price. WTI reaches as high as 50.83 so far today as the corrective rise from 42.05 extends. For now, further rally is expected as long as 48.46 minor support holds, target cluster resistance at 54.61, 38.2% retracement of 77.06 to 42.05 at 55.42. We’d expect strong resistance from there to limit upside.
Accompanying that USD/CAD would be target 61.8% retracement of 1.2781 to 1.3664 at 1.3118.
Meanwhile, another key factors on Canadian Dollar is today’s BoC rate decision. We’d maintain that BoC will keep policy rate unchanged at 1.75%. Besides releasing the statement and Monetary Policy Report, the central bank would also update the economic forecasts and host a press conference. The focus of the meeting would be possible downward revisions on the growth outlook and forward guidance on the policy stance. We expect the central bank to maintain the dovish tone laid down in the December meeting.
We expect BOC to trim its inflation forecast due to lower energy prices. Current rebound in oil price was mainly driven by the Saudi-led production cut and US-China trade talk. We believe the boosts to oil prices are short-lived. Global economic slowdown this year is prone to limit demand for oil, limiting the rally in oil prices. BOC should also downgrade its GDP growth estimate modestly. In the near- term growth would be dampened by Alberta’s compulsory reduction in oil output, effective in the New Year. In the longer-term, the country’s economic growth would be affected by the overall slowdown in the global economy.
More in: BOC Preview – No Change in Rates, Dovish Stance Accompanied by Modest Forecast Downgrades
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