The BOC will get steamrollered by the Fed trade
The great thing about trading is that there's always an opportunity just around the corner. Today we might just have one of the most glaring opportunities for trading central banks.
Pure and simple, the Fed trade is back in full force and any hawkish, or less dovish comments from the BOC is going to see CAD gain and therefore USDCAD sink. Anything that goes against this current US dollar bullishness, even on an intraday basis, is likely to be a dip buyers dream.
There's zero expectations for this meeting so getting a move south worthy of dip buying might be the sticking point.
Looking at the charts, the 100 dma at 1.3276 is probably the best place to lean on, and the 55 dma at 1.3220 looks even better, though I doubt we'll get even remotely close to that just on the BOC.
USDCAD daily chart
Still, stranger things have happened and all being well, that's what I'm looking at.
To aid the possible trade further, the Jan US personal income and spending data will be a good litmus test for this USD rally. It contains the PCE data also, which the Fed likes to watch as their inflation gauge. If we get a soft number in both the PCE and Core, that might let some air out of March expectations, and therefore the dollar. How it reacts will be important in playing the BOC trade after. If the data's bad but the buck ignores it, then the trade might be on. If we see some growing USD weakness, I'll be inclined to leave it alone.
