Getting ready for Wednesday

6 сент. 2022 г.

In preparing for the BoC Policy Decision which comes to us on Wednesday at 10:00 am we see a retracement from last week's USD rally. Recent oil news proves choppy at best with OPEC announcing a small, 100k/bpd cut. It's essentially tearing a single page out of "War and Peace" with lingering global concerns. Looking towards tomorrow, the BoC is expected to deliver a 75bps rate hike (likely already priced into the market) taking the target to 3.25%. What I think that investors will be looking at would be the possibility of another 100 bps hike just like we saw in July. The BoC, even though becoming more restrictive, still has work to do to achieve price stability. I'm watching the USDCAD flow between these trend lines in search for some solid footing. Depending on the Asia session tonight and a 75 vs 100 bps hike tomorrow the pair likely has some downward potential. What I would look to see would be a break of the trend line and support found around the 1.0308 area. If that happens, we likely see downward potential to the 1.3 psychological mark. A break of last week's high and mid-July's 1.3223 mark leaves 1.33 wide open.

I'm sticking with neutral on this right now but would not argue a more bearish tone.