The US dollar has struggled during the trading session on Tuesday against many currencies, and the Canadian dollar will not have been any different.
USDCAD
The US dollar has struggled during the trading session on Tuesday against the Canadian dollar, but quite frankly, this is a market-wide phenomenon. This isn't just the Canadian dollar speaking here, as US tensions with trade barriers continues, that causes a little bit of negative pressure here as well.
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But we still find ourselves in the same range that we have been in since June. After all, the 1.3550 level has been very resilient as far as support. One thing that could be helping just a bit for the Canadian dollar is the fact that the crude oil market has been relatively resilient as well. I wouldn't exactly go so far as to call crude oil bullish, but I think that we have a situation where it's at least starting to perk up a bit.
Central Bank Watch
So, a lot of traders will buy the Canadian dollar as a proxy. The Bank of Canada is expected to basically hang tight with the policy rate currently sitting at 2.25%. All eyes are on whether or not the bank will remain neutral or signal a shift towards tightening as inflation has proven stickier than anticipated.
The consensus right now for the Bank of Canada meeting on Wednesday is that they basically hold with a bit of a hawkish tone. That being said, I don't know that Canada is alone in this; I think we find ourselves in a situation where a lot of central banks may have to change their tone, but in the short term, obviously that will catch all the headlines. Breaking below the 1.3550 level opens up the 1.34 level. If we turn around and rally from here, I'd look out for resistance near the 1.3750 level.
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