USD/CAD: Near-term setup will hinge on next week's US inflation report – TDS

The Bank of Canada (BoC) hiked by 75 bps. The BoC meeting was a non-event for USD/CAD. In the opinion of economists at TD Securities, the near-term outlook will hinge on next week's US inflation report.

Fading rallies ahead of 1.32

“The BoC hiked 75 bps, as expected, and noted that further rate hikes are coming.” 

“Overall, there isn't much to chew on for CAD besides that the Fed/BoC terminal rate level should work in favor of the USD over the medium-term. That setup should reinforce the recent ranges, but ultimately CAD remains a function of risk appetite and broad USD trends.” 

“Most of our tools anchor USD/CAD around 1.30 so we would look to start fading rallies ahead of 1.32. 

“The near-term setup will hinge on next week's US inflation report. Another downside miss would be supportive of risk sentiment, supporting a near-term USD pullback, while a stronger number would reinforce the USD's topside momentum.”