Hike rates

Bank of Canada preview Will the BOC raise rates by 75 basis points

When is the Bank of Canada meeting?

Bank of Canada interest rate decision meeting to be held on Wednesday, October 26e2022 at 10:00 a.m. ET. BOC Governor Macklem will follow with a press conference beginning at 11:00 a.m. ET.

What do traders expect from the BOC Meeting?

Traders and economists widely expect the Bank of Canada to hike rates 75 basis points to bring the overnight rate to 4% at Wednesday’s meeting.

Overview of the BOC meeting

At its last meeting on September 7ethe Bank of Canada raised rates by 75 basis points. It was the fifth consecutive rate hike and took rates to 3.25%, the highest since 2008. Furthermore, the BOC said that “given the outlook for inflation, the Board of Governors still judges that the policy interest rate will need to increase further.” The central bank also said it would continue with its quantitative tightening program.

Since then, Canada has experienced two inflation footprints. The overall CPI for August fell from 7.6% to 7%! However, the September reading only fell to 6.9%, slightly better than expected. The year-over-year base rate only fell from 6.1% in July to 6.0% in September as well. While the print headline may have fallen 0.7% yoy in two months, the base rate was only down 0.1% yoy. BOC Governor Macklem spoke between the inflation readings and noted that further interest rate hikes are warranted to bring inflation under control. Markets took these comments as hawkish. In addition, September’s unemployment rate fell to 5.2% from 5.4% in August. That should give the BOC confidence to rise 75 basis points.

Technical view: USD/CAD

USD/CAD has been moving in an ascending channel since early April. September 21stthe pair broke above the upper rising trendline near 1.3400 and continued higher. USD/CAD hit a high of 1.3978 on October 13ebecause the RSI and the price have diverged. Since then, the pair has retreated slightly and is currently trading near 1.3700.

Source: Tradingview, Pierre X

Over a 240-minute timeframe, USD/CAD coils inside symmetry awaiting the outcome of the BOC meeting. If the pair breaks up, the first resistance is the October 21 highsst at 1.3854. Above, USD/CAD may move towards October 13e highs at 1.3855 and then 1.4008, which is the May 2020 high. However, if the pair breaks lower, the first support is at the 38.2% Fibonacci retracement level from the September 13 lows.e at the heights of October 13e at 1.3586. Below there, the support is on October 4e the lows of 1.3503, then the 50% retracement from the aforementioned period near 1.3466.

20221024 USDCAD 240

Source: Tradingview, Pierre X

With the Bank of Canada meeting on Wednesday, the BOC is expected to hike rates by 75 basis points. As a result, USD/CAD is moving towards the center of its recent range. The key will be to watch the statement and guidance and try to determine if the Bank of Canada is ready to pivot and start slowing the pace of rate hikes!