08:31 AM EDT, 10/23/2024 (MT Newswires) -- The Canadian dollar (CAD or loonie) is technically oversold but stands a better chance of rebounding if the Bank of Canada keeps with the script of three previous cuts this year and delivers a 25bps cut instead of a 50bps onem on Wednesday, said Societe Generale.

Canada's central bank is slated to release its policy decision, as well as the Monetary Policy Report, at 9:45 a.m. ET on Wednesday.

The consensus has shifted towards half a point after headline inflation fell below the target range in September, wrote the bank in a note to clients.

However, the strong employment report of last month is a mitigating factor, stated SocGen. Full-time payrolls expanded by 112,000 and the unemployment rate surprisingly fell a smidgen to 6.5%, ending a long stretch of increases since July 2022.

Much of what the BoC decides will depend on the updated projections for inflation and the output gap for 2025 and 2026, pointed out the bank.

In the latest business and consumer survey of the central bank, businesses' inflation expectations continue to normalize. Over 70% of survey participants anticipate inflation to be within a 1% to 3% range over the next two years, the highest proportion since Q1 2021.

USD/CAD has historically failed to sustain levels north of 1.39, but this isn't 2022 or 2023, added SocGen. An overshoot towards 1.40 isn't out of the equation even though risks may seem skewed to the downside over the longer term.