USD/CAD unchanged on the day above 1.24 ahead of BoC

• WTI stays below $64 for the second day.
• DXY consolidates daily gains near mid-90s.
• BoC is expected raise rates by 25 bps.

The USD/CAP pair is having a difficult time finding drection on Wednesday as investors wait for the BoC to announce its monetary policy decisions. As of writing, the pair was trading at 1.2434, virtually unchanged on the day.

Earlier today, the selling pressure on the pair faded away with the greenback recovering a part of its recent losses. After failing to preserve its daily gains and closing the day a little above the 90 mark with small losses, the US Dollar Index is making another recovery attempt. At the moment, the index is up 0.27% at 90.47.

Meanwhile, the barrel of WTI is struggling to retake the $64 handle, not allowing the commodity-sensitive loonie to find extra demand.

The next catalyst for the pair will be the Bank of Canada's monetary policy decision which is due at the top of the hour. Although markets widely expect the bank to make a 25 bps rate hike, a cautious tone amid NAFTA negotiations could limit the pair's downside. "With markets all but pricing in a 25bp BoC rate hike today (1500 GMT), we see the key driver for CAD as being the propensity for further tightening amid rising NAFTA break-up risks. A hawkish hold today is a non-trivial risk, though with net exports not an integral part of the BoC’s positive outlook – and other areas of the economy firing on all cylinders – a 25bp hike today is the most likely outcome," Viraj Patel, Foreign Exchange Strategist at ING wrote in a recent report.

Technical outlook

The pair could face the first technical support at 1.2405/00 (Jan. 15 low/psychological level) ahead of 1.2355 (Jan. 5 low) and 1.2255 (Sep. 22 low). On the upside, resistances align at 1.2500 (psychological level), 1.2580 (Jan. 10 high) and 1.2640 (100-DMA).