During today's Asian trading session, traders' activity was low. The dollar showed multidirectional dynamics, declining against major commodity currencies and strengthening against European ones.
There are also not many important macro statistics planned to be published in today's economic calendar. Although it is still worth paying attention to the publication of data with house price indices in the United States, which, one way or another, are inflation indicators, and to the publication of the Conference Board report with data on the level of confidence of American consumers. This indicator is the leading indicator of consumer spending, which accounts for most of the total economic activity. The indicator is expected to decline from 108.0 in September to 105.9 in October, which in itself is not a very positive moment for the USD.
How will the dollar react to the relative decline in the indicator—it may decrease, although the curve reflecting the dynamics of this indicator has been ascending since 2009. The confidence of American consumers in the economic development of the country and their economic situation as a whole remains stable, and this is a positive factor for the USD.
Tomorrow, market participants who follow the dynamics of the main commodity currencies will be interested in the publication (at 00:30 GMT) of consumer price indices in Australia, as well as the meeting of the Bank of Canada. It will end with the publication (at 14:00 GMT) of the BoC's interest rate decision.
Inflation in Canada accelerated to almost a 40-year high. In February 2022, consumer prices in Canada increased by 5.7% year-on-year after rising by 5.1% in January, reaching a 30–year high, in May—to 7.7%, and in June—to 8.1%. This is the highest figure since the beginning of 1983.
Given that the inflation target for the Bank of Canada is in the range of 1%–3%, a rise in CPI above this range is a harbinger of a rate hike and positive (under normal economic conditions) for the CAD.
The current interest rate level is 3.25%, and it is widely expected that at this meeting, the BoC will raise the interest rate again by 0.75% to 4.0%. The harsh tone of the accompanying statement regarding the prospects of the central bank's monetary policy should, theoretically, have a positive effect on CAD quotes. Although, the Bank of Canada, like many other major world central banks that have embarked on the path of tightening monetary policy, is in a difficult situation—to contain the growth of inflation without harming the national economy.
In other words, it becomes difficult to predict exactly the direction of CAD movement after the publication of the Bank of Canada's decision on rates, although, in normal economic conditions, an increase in the interest rate has a positive impact on the quotes of the national currency.
As of writing, the USD/CAD pair is trading near the 1.3725 mark. There will probably be an attempt to break through the short-term resistance level of 1.3735, followed by an increase towards local resistance levels of 1.3800, 1.3830, 1.3977. This probability will increase if tomorrow's accompanying statement by the Bank of Canada executives is considered soft by market participants. At 15:00 (GMT), the press conference of the BoC will begin, which will also cause an increase in volatility in CAD quotes, and the USD/CAD pair, respectively.