The Canadian Dollar (CAD) is soft, down a marginal 0.1% vs. the USD into Wednesday’s dual BoC/Fed rate decisions, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets are waiting for a cut

The Bank of Canada is also widely expected to deliver a 25bpt rate cut at 9:45am ET, and Gov. Mackelm will hold a press conference at 10:30am ET. As with the Fed, we see the bar to a dovish BoC surprise as being somewhat elevated, given that markets are actually pricing nearly 29bpts of easing for today’s decision and nearly 50bpts of easing by year end. Macklem’s communication will be critical as markets look to key comments on inflation and the outlook for price stability in the aftermath of the latest trade policy developments. Comments on Canada’s fiscal situation will also be closely scrutinized, given Tuesday’s announcement of a November 4 release date for the federal budget. In terms of CAD fundamentals, we note the stabilization in yield spreads. Our USDCAD FV assessment is currently at 1.3561 and still exhibiting a meaningful divergence from current levels in spot however the extent of the residual appears to be narrowing.

"USD/CAD’s technical picture looks to have turned more decidedly bearish following Tuesday’s break of the 50 day MA (1.3772) trend support level. The RSI has also drifted below 50 into bearish territory, and the near-term balance of risk favors further downside and a push through recent support in the mid1.37s. We look to a near-term range between 1.3700 and 1.3800."