The week has gotten off to a slow start in terms of impactful economic data, and the dearth of scheduled releases will carry over through tomorrow’s trade as well. That said, the latter half of the week should be more interesting for FX traders, starting with Wednesday’s Bank of Canada meeting.

Despite weaker-than-expected CPI (-0.4% m/m vs. +0.1% eyed) and Retail Sales figures (-0.1% vs. +0.3%) last week, the Bank of Canada is almost certain to raise interest rates. With President Trump’s trade ire swinging back across the Atlantic toward China, the biggest risk to Canada’s economy (an abrupt end to NAFTA, or a NAFTA-like, trade deal) is now in remission.

Traders have taken notice, with the market-implied odds of a rate hike rising above 90%, so we’re unlikely to see much reaction to the interest rate decision itself. Instead, FX traders will key in on the central bank’s quarterly monetary policy report, including its forward economic projections, as well as BOC Governor Poloz’s subsequent speech, for hints about monetary policy will develop moving forward.

In previous meetings, the BOC has emphasized “uncertainty about trade policies,” so the expected removal of those concerns could support the loonie, especially if it results in more optimistic economic forecasts in the monetary policy report. While Poloz, an experienced central banker, is unlikely to pre-commit to any course of action, he could leave the door open for two more rate hikes by the middle of next year.

Technical View: USD/CAD

Turning our attention to USD/CAD’s daily chart, rates are pressing the top of the bearish channel off the July highs following a strong rally so far this month. Simultaneously, the RSI indicator is pressing against the “60” level, which has capped rallies in the currency pair for the last four months. In other words, the 1.3125 resistance level will be the key area to watch around the BOC release.