CAD : Oversold

(Mon, 7 Dec 2020). USD/CAD bounces back from a fresh monthly yearly low (1.2770) ahead of the BoC’s last meeting for 2020 as the US Dollar appreciates on the back of waning investor confidence, but the exchange rate may extend the series of lower highs and lows from the start of the month as the Relative Strength Index (RSI) tracks the downward trend from November and sits in oversold territory for the first time since June.

Looking ahead, the BoC is expected to keep the benchmark interest rate at the record low of 0.25% on December 9 as the central bank adjusts its quantitative easing (QE) program, with Governor Tiff Macklem and Co. announcing that “total purchases will be gradually reduced to at least $4 billion a week” as the board plans to shift its QE program towards longer-term bonds.

In turn, the BoC may largely endorse a wait-and-see approach going into 2021 as the central bank insists that the “QE program will continue until the recovery is well underway,” and key market trends may continue to influence USD/CAD as the Federal Reserve vows to “increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.”

With that said, key market trends may keep USD/CAD under pressure as the US Dollar continues to reflect an inverse relationship with investor confidence, and the exchange rate may extend the series of lower highs and lows from the previous week as the Relative Strength Index (RSI) tracks the downward trend from November and sits in oversold territory for the first time since June.

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