USD/CAD jumps toward 1.3100 ahead of BoC and FOMC

• US Dollar posts mix results during American session while Loonie tumbles. 
• USD/CAD heads for biggest daily gains since October 2 ahead of Fed and BoC. 

The Canadian Dollar weakened across the board during the American session on the day before the central bank meetings. The USD/CAD pair rose from 1.3041, the lowest in three months to 1.3094, the strongest level since last Wednesday. 

The slide of the Loonie takes place the day before the Bank of Canada meeting. No change in monetary policy is expected but analysts do not rule out a December cut. “We're not expecting the Bank of Canada to follow the Fed with rate cuts just yet. The labour market's stronger than expected, inflation's broadly on target and rates are already lower than in the US. And that will add to further CAD momentum. However, there are some signs of weakness, and a December rate cut can't be ruled out”, wrote ING analysts. 

Also on Wednesday, the Federal Reserve will announce its decision. A rate cut is widely expected. At TD Securities, they see a 25bp, delivering the third consecutive cut since July, in line with market consensus. “The FOMC should communicate patience in deciding future policy moves as they assess the impact of the three cuts they have already delivered. We look for the Fed to temporarily pause before resuming rate cuts in Q1 2020.”

The rally in USD/CAD over the last hours stood out as most forex crosses remained in tight ranges, waiting for the FOMC.

Strong rebound from 1.3050

The USD/CAD is rising sharply today after the Loonie failed to break the 1.3050 barrier. Today’s move could signal a short-term bottom has been established. The trend still points to the downside, but it has lost momentum. 

On the upside, the immediate resistance is located at 1.3090/1.3100; a break above would clear the way for an extension of the correction. On the flip side, a close under 1.3050 should expose July lows at 1.3015.