FX.co ★ Bank of Canada takes a cautious and wait-and-see attitude tomorrow

Yesterday, the Canadian dollar paired with the US currency tested the 30th figure, although it was not possible to gain a foothold in this area, especially on the eve of the May meeting of the Bank of Canada. And although the regulator will certainly not take any action tomorrow, his rhetoric can confirm the "bullish" mood of traders. Everything will depend on the totality of the accompanying statement and the ratio of pessimistic and optimistic assessments.

Let me remind you that after the January rate hike, the Central Bank of Canada took a wait-and-see attitude, although the market mostly expects another round of tightening of monetary policy before the end of this year. In general, the regulator does not deny such intentions, but many circumstances force him not to rush to action. Among the uncertainties are complex negotiations on the NAFTA (North American Free Trade Agreement), problems with the replacement of the oil transmission line (the Enbridge Line 3 pipeline), the decline in the oil market in general, and the controversial situation on the Canadian housing market. All these factors influence the resolution of the regulator's members, so it is necessary to consider each of them separately to understand the degree of risk.

Let's start with the most global issues. The trilateral talks on the NAFTA have once again got stuck in the debate, although the "deadline" is already close enough (on July 1, when the pre-election campaign begins in Mexico). Even the high-level dialogue does not help the parties. The US President and the Prime Minister of Canada regularly discuss this topic in a telephone mode (the last time the leaders discussed this issue was last week). Yesterday, it became known that due to the stagnation in the talks in Washington, Canada's Foreign Minister Chrystia Freeland is leaving, which will meet with the Mexican Minister of Economy and the main NAFTA negotiator from the United States. This is not their first meeting, so no one has any special illusions about its effectiveness, but, on the other hand, each such step increases the likelihood of a long-awaited breakthrough. The Central Bank of Canada closely follows the negotiation process, so in the event of a re-negotiation of the transaction, the chances of an increase in the rate in the third quarter will increase.

Also, traders await the decision of the Minnesota Utilities Commission regarding the replacement of the Enbridge Line 3 pipeline by the Canadian company Enbridge Energy. This is a multibillion-dollar project, which will increase the capacity of the oil pipeline by half. Against its implementation, local environmentalists and Indian tribes spoke, however, according to recent data, the Canadian concern has decided to allocate several million dollars for social investment (primarily environmental security), so the likelihood of a positive decision of the commission has increased. The regulator will make its verdict in June, so this issue is in limbo.

The situation in the oil market is also shaky. The quotations collapsed to $ 75 because of concerns about the actions of Russia and Saudi Arabia. The market has information that countries can increase the level of oil production in the second half of the year. Such intentions caused panic, and Brent lost many of the conquered positions in a few days. Now, oil traders weigh risks in anticipation of additional information. The situation will largely clear up in June, during the OPEC + summit.

Now, a few words about the macroeconomic statistics of Canada. Key indicators show growth, although the pace of this growth leaves much to be desired. Inflation in monthly terms remained at the same level, 0.3%, unemployment also reached the level of the previous months - 5.8%. The volume of GDP in February jumped to 0.4% (after a reduction in January to -0.1%), but in March, it is also expected to decline to 0.2% in monthly terms. The release of this indicator is scheduled for Thursday, May 31, that is, after the May meeting of the Canadian regulator.

Thus, the external and internal fundamental background of the Canadian demonstrates uncertainty. Many key issues will be resolved not earlier than June (the OPEC summit, the fate of the NAFTA, the replacement of the oil transmission line, etc.), so the Central Bank will again have to wait. The rhetoric of the accompanying statement, in my opinion, will be cautious. This circumstance will allow bulls USD / CAD to continue the northern trend.

From the technical point of view, there are also all the prerequisites for further growth of the pair. On the daily chart, the price is on the top line of the Bollinger Bands indicator, which shows an extended channel. Indicator Ichimoku Kinko Hyo formed one of its strongest signals, a bullish "Line Parade". In addition, the pair is located above the cloud Kumo, which also indicates the north direction of the price.

The support level is the price of 1.2880, this is the Tenkan-sen line of the Ichimoku Kinko Hyo indicator. But the resistance level (the first price target) is the 1.3150 mark, this is the top line of the Bollinger Bands indicator on the weekly chart.