Bank of Canada decision looms as USDCAD stays neutral

BoC decision preview: A rate increase is the likely outcome, yet the choice is still a close call.

At 9:45 AM ET, the Bank of Canada will unveil its rate call, with the consensus pointing to a 25-basis-point hike to 2.50% from 2.25%. Still, the analyst community is split: 19 out of 34 economists polled by Reuters expect a move, and money markets had assigned odds of approximately 77% to an increase prior to the release.

The central question for policymakers is whether elevated energy costs will feed into more widespread inflation. Headline inflation for September climbed to 3.1%, whereas core gauges fell under 2%. As a result, officials must balance the threat of sticky price pressures against the economic toll of tightening. RBC anticipates a hike, though it admits its confidence is weak, suggesting the Bank might instead hint at a move at a later session.

The Monetary Policy Report released alongside the decision will bring fresh projections and may carry as much weight as the rate action itself. For the USDCAD pair, the response will hinge on both the guidance and the call. A rate rise paired with a clear tightening stance could buoy the loonie and drag USDCAD down. An unexpected pause or dovish signals could hand buyers in USDCAD a chance.

The moving averages set the scene for the struggle between buyers and sellers.

The pair sits above the 100-hour moving average at 1.4021, yet remains under the 100-day moving average at 1.40458 and the 200-hour moving average at 1.40525.

These averages serve as the first gauges during the announcement. A lasting climb above 1.40458–1.40525 would reinforce the upside view. A fall beneath 1.4021 would hand greater influence to the bears. Within that range, no clear edge exists for either camp.

Downside levels: 1.3995, then the low from last week.

If the pair drops below 1.4021, the focus would turn to modest support around 1.3995.

Below that, last week's low at 1.3966 serves as the next marker. That bottom halted just over the 1.3948–1.3963 swing zone, underlining its significance. Bears would have to clear that region to pave the way for a sharper drop.

Upside levels: Bulls must win back 1.40818.

A durable move beyond the moving-average resistance cluster would draw attention to the high from last Wednesday and the breached 38.2% retracement at 1.40818.

Clearing and defending that obstacle would unlock gains toward the 1.4110 swing point, then the higher zone between 1.41297 and 1.4153.

Post-decision focus: Confirm whether the move persists.

The initial response requires validation. An advance above resistance that promptly fades, or a dip below support that rebounds, would hint at a false break.

Traders have a straightforward plan: the pair is bullish above 1.40525 and bearish below 1.4021, with the capacity to sustain moves past these thresholds deciding which side gains traction.