USD/CAD rallies above 1.2600 and reaches weekly high ahead of the BoC

• USD/CAD reaches a weekly high of 1.2643.
• Market sentiment remains downbeat, thus weighing on commodity-linked currencies like the loonie.
• Bank of Canada is expected to keep its bond purchases unchanged.

The USD/CAD has climbed during the American session and is trading at 1.2636, up 0.82% at the time of writing. Earlier in the Asian session, it dipped to 1.2519, setting a daily low, though it cut its losses on the back of broad US dollar strength and reached a weekly high at 1.2643.

The market sentiment is downbeat, with most of the European indexes closing with losses. Regarding the US stock indexes, the Dow Jones and the S&P 500 are losing 0.52% and 0.16%, respectively. Meanwhile, the Nasdaq 100 is the exception gaining 0.27%.

The US dollar index, which tracks the greenback’s performance against six major currencies, is rising in the session at 92.46, up 0.28%, weighing on oil prices. WTI has slid to $68.18, losing almost 1%, on the back of Saudi Arabia’s ARAMCO slashing prices for Asian customers.

Lack of market-moving news regarding the Canadian and US economic dockets will maintain the USD/CAD greatly influenced by US dollar/oil-related developments.

On Wednesday, the Bank of Canada will hold its monetary policy meeting. The market expects the bank to keep the interest rate at 0.25% and its bond purchases at CAD 2 billion per week.

USD/CAD Price Forecast: Technical outlook

USD/CAD is trading above its main daily moving averages, trending upwards. If the bulls want to ride the trend, they will need a clear break above daily highs. The following target would be the August 27 swing high at 1.2708. Above this latter, there is not much in the way until the August 20 high at 1.2949.

On the flip side, USD/CAD pair failure to break above 1.2643 could lead to further losses. The first support is 1.2600, followed by the 50-day moving average at 1.2578 and then, the September 3 low at 1.2493.

The Relative Strength Index is at 53.75, aiming higher, supporting USD/CAD bullish bias.