USD/CAD – Bank of Canada On Track For Another Round Of Tapering

#OPINIONLEADER#

 OCT 27, 2021

• BoC expected to taper QE by C$1 billion per week
• USD/CAD ranging within 120pips
• BoC tapering decision presents potential trading direction

Chart 1: USD/CAD H4 chart

The Bank of Canada (BoC) is scheduled for a monetary policy meeting later at 2200 (GMT+8). There is a strong expectation in the market that the central bank will be tapering its quantitative easing (QE) from the current C$2 billion per week to C$1 billion per week. With the opening up of the Canadian economy due to progress made in handling the pandemic, the positive job market situation and high inflation pressures, it is very likely that the BoC will taper its QE.

USD/CAD has been trading within a 120pips range for more than a week despite the recent rise in oil prices. This range presents us with both potential buying or selling opportunities depending on how the monetary policy meeting turns out. If the BoC were to carry out a QE tapering as expected, USD/CAD may weaken for a short period of time. However, if the central bank disappoints by not tapering its QE, that may lead to a strengthening of USD/CAD.

Trade Setup for USD/CAD (H4)

Buy Stop at 1.2430

Sell Stop at1.2270

Upcoming news that may impact price movement of USD/CAD

27 October – Bank of Canada monetary policy decision at 2200 (GMT+8)

27 October – Bank of Canada press conference at 2300 (GMT+8)

28 October – U.S. Advance GDP q/q data release at 2030 (GMT+8)

29 October – Canadian GDP m/m data release at 2030 (GMT+8)

29 October – U.S. Core PCE Price Index m/m data release at 2030 (GMT+8)