In this month, the USD/CAD pair has repeatedly tried to subdue the 1.35 mark, but so far, it has not managed to consolidate above this level.
Despite a rather positive statistical data from Canada, the USD / CAD pair has been trading upward over the past six weeks.
Today, the results of the next meeting of the Bank of Canada (BoC) on monetary policy will be announced.
Investors tend to expect cautious rhetoric from the regulator. If they turn out to be right and the Central Bank ignores both of the strengthening of the labor market and the growth of retail sales in the country, then another attempt to storm the 1.35 bulls could be crowned with success.
According to the latest data, the Canadian economy is in good shape. In April, the number of jobs in the country increased by a record of 106.5 thousand, reaching the highest level since 1976. The situation also improved in the housing market and growth in manufacturing activity has accelerated. Inflation declined on a monthly basis but returned to the 2% mark in annual terms.
At the time of the April BoC meeting, the Canadian economy also showed significant improvement. However, the regulator completely ignored the strong data and lowered its economic forecasts. In addition, the Central Bank expressed concern about the growth prospects of the global economy and the trade war between the United States and China.
Since then, the economy of the Maple Leaf has continued to strengthen but trade relations between Washington and Beijing have deteriorated significantly. Oil quotes have declined by more than 10% and stock markets have passed local highs. The Middle Kingdom is the second most important trading partner of Canada after the United States and the prospect of slowing economic growth in both countries poses a greater threat to the six-month BoC forecast. If the regulator goes too far with concern, it may be enough for the USD / CAD pair to close above 1.35 for the first time since the beginning of the year.
Meanwhile, the EUR/USD pair continues to decline in anticipation of the final placement of the new political forces in the EU after the recent elections to the European Parliament.
"Although the absence of a more dramatic shift to the right is in itself positive for the euro, the growing political division of the Old World could be a burden for the single European currency," said Stefan Bielmeier, chief economist at DZ Bank.
According to him, the greatest risks for the euro are the new political crisis in Italy and the collapse of the ruling coalition in Germany.
"The initial relief from the fact that populists did not receive a tangible advantage in the elections to the European Parliament was replaced by fears about the lack of a clear majority among the centrists that could lead to political paralysis," said John Hardy, currency strategist at Saxo Bank.
"The elections to the European Parliament have ended relatively successfully for the single European currency. However, it remains vulnerable amid sluggish economic growth in the EU and concerns about a possible deterioration in the trade relations between Washington and Brussels," said Jane Foley from Rabobank.
"Another risk factor for the euro is to strengthen the position of the Italian eurosceptics, encouraged by the success in the past elections," she added.
According to Rabobank's forecast, the EUR / USD pair can sink to the level of 1.10 in the next three months.
