Scotiabank strategists Shaun Osborne and Eric Theoret report USD/CAD is steady near 1.39 as markets await the Federal Reserve (Fed) and the Bank of Canada’s (BoC) summary of deliberations. They note the BoC is likely to sound more hawkish after firmer inflation data and still-accommodative policy. Technically, they see USD/CAD pressing resistance, with a break above 1.3950 opening the way toward the 1.40–1.4150 area.

Resistance test and BoC risk

"The CAD is essentially flat on the day as markets await the Fed. The BoC summary of deliberations on the September 2nd policy decision at 13.30ET is likely to reflect the hawkish tone struck by Governor Macklem at the post-meeting press conference."

"The Bank’s focus on inflation risks relative to growth uncertainty caused by trade friction may have sharpened following this week’s inflation data which suggest firmer underlying pressure on prices, despite the main releases largely meeting expectations"

"The Bank’s policy settings remain accommodative and concern about price pressures suggests a growing risk that the process of normalization may start late this year, per Scotia’s long-held rate forecast."

"PM Carney’s “Productivity Mega Deduction” announced yesterday which slashes the marginal effective tax on new business investment to 6.4% is not an immediate driver for the CAD. The cost is hefty—CAD36bn over five years—but it is a significant pro-investment move to boost investment and productivity over the medium-to-longer term."

"Bullish—The USD continues to pressure a broad resistance zone between the low/mid 1.39s, trend momentum is shifting to modestly USD bullish on the daily chart."

"A sustained push above 1.3950 opens the topside for a push higher, potentially to the 1.40/1.4150 zone. Support is distant at 1.3825/30."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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