The decision of the Bank of Canada will be published today at 03:00 pm GMT. Market participants expect the BoC to hike the interest rate from 1.00% to 1.25%. Together with the decision, the Monetary Policy Report will be published with the update of economic forecasts called BOC Monetary Policy Report. At 04:15 pm GMT, the conference of President Poloz and vice president Wilkins is scheduled.

In the December statement, the Bank of Canada emphasized in its forward guidance that it intends to be cautious and subject to the incoming data from the economy. From the point of view of this second argument, everything seems to be conducive to further monetary policy tightening. The readings from the labor market are impressive - in December employment grew by 78.6k places, beating expectations for a modest increase of 2k only. The unemployment rate is at a historical minimum of 5.7%. Although the economic growth rate in October (latest available data) expired 0.2% on a monthly basis, but the annual dynamics remained solid at the level of 3.4%. CPI inflation in November raised to 2.1% on yearly basis from 1.4%, thus reaching the inflation target of 2.0%. Retail sales for October were also good at 1.5% m/m at the threshold 0.3%.

However, BoC also remains cautious in its attitude regarding the further development of the economic situation, as well as the risk assessment for prospects. In this context, the greatest threat concerns the ongoing US negations about the future of the NAFTA agreement. Last week there was information from representatives of the Canadian government, among which there is growing confidence that the US will break the deal during the sixth phase of talks at the end of January. The collapse of talks would mean serious perturbations for Canada's trade, which would hit the economy. Tough nut to crack for the Bank of Canada, so the press conference will be very interesting to watch, despite the priced in interest rate hike.

Let's now take a look at the USD/CAD technical picture at the H4 time frame. The price got back to the consolidation zone between the levels of 1.2397 - 1.2449 after a failed attempt to rally above the technical resistance at the level of 1.2598. Most of the BoC interest rate hike might be priced in already, so the relief rally toward the level of 1.2598 again should be expected now.