BoC to offer rate cut – Société Generale

USD/CAD recently broke above the trend line drawn from February, leading to an extended pullback, note market analysts at Société Generale.

A hawk cut can invite short coverage

“USD/CAD recently broke above the trend line drawn from February, resulting in an extended pullback. It settled below the 200-DMA, which denotes a lack of sustained upward momentum.”

“The MA near 1.3590/1.3620 needs to be broken to confirm a near-term rebound. Holding below this hurdle, there could be risk of further decline towards the next potential supports located near the March lows of 1.3420 and 1.3350, the 76.4% retracement from December.

The Bank of Canada is set to cut interest rates by a quarter point for the third time in a row today. USD/CAD is back below 1.3550 after briefly breaking above 1.3900 amid the shipping chaos of early August. A hawkish cut could invite short-covering and guide the Loonie below 1.35, subject to a recovery in risk sentiment.