FxWirePro: USD/CAD to move lower as BoC and Fed diverge on monetary policy

The Canadian dollar has strengthened against the U.S. dollar since May when the U.S. Federal Reserve signaled the possibility of rate cuts going ahead. USD/CAD has declined from 1.356 area in May to 1.303 area as of today.

Despite this 500 pips run for the pair, our calculations at FxWirePro suggests that the pair remains open to further downside largely due to monetary policy divergence. While the Federal Reserve has forecasted two rate cuts heading to 2020, at this week’s meeting governing council at Bank of Canada (BoC) has shown remarkable resistance to further rate cuts despite the brewing trade dispute between Beijing and Washington. Bank of Canada (BoC) Governor Stephen Poloz boldly added that rate cuts are not a panacea to trade war.

Trade idea:

• Calculations suggest USD/CAD likely to decline further and test support around 1.27 area.