USD/CAD Continues the Bounce, After BOC Keeps Keeps the Same Bias

USD/CAD bounced off the 200 daily SMA yesterday and today the bullish momentum continues

Written by: Skerdian Meta • Wednesday, September 8, 2021 • 2 min read

USD/CAD was on a bearish trend which lasted more than a year, until the beginning of summer. Moving averages were pushing it lower on the daily chart, as the USD kept declining while the CAD was following Oil prices higher. The trend changed in early June and this pair climbed pretty close to 1.30 in August. During the last couple of weeks, we saw a pullback in USD/CAD, after the big upside-down pin which is a bearish reversing signal.

But, the 200 SMA (purple) which had acted as resistance before turned into support and this pair bounced higher yesterday. Today, the Bank of Canada interest rate decision was on the agenda, although they didn’t really change anything from the last meeting. USD/CAD continues the climb after the BOC meeting, so buyers remain in charge in this pair as well.

USD/CAD Live Chart

USD/CAD

Bank of Canada Rate Decision and Statement

Rate of QE unchanged at $2B per week, as expected
Rates left unchanged at 0.25%, as entirely expected
“Supply chain disruptions are restraining activity in some sectors and rising cases of COVID-19 in many regions pose a risk to the strength of the global recovery”
The global economic recovery continued through the second quarter
Weak Q2 GDP largely reflects a contraction in exports, due in part to supply chain disruptions, especially in the auto sector
Housing market activity pulled back from recent high levels, largely as expected
BOC continues to expect the economy to strengthen in the second half of 2021, although the fourth wave of COVID-19 infections and ongoing supply bottlenecks could weigh on the recovery
Factors pushing up inflation are expected to be transitory
This is a statement-only release, no projections or press conference
Macklem will deliver a speech tomorrow

Here’s the final paragraph, which includes the BOC’s guidance. It’s exactly the same as in July:

The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens in the second half of 2022. The Bank’s QE program continues to reinforce this commitment and keep interest rates low across the yield curve. Decisions regarding future adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

There were many market watchers looking for a signal on delaying the taper but there’s nothing here like that. There’s not even a strong nod to growing uncertainty or the likelihood that the BOC’s +6% GDP growth forecast for this year is highly unlikely to be reached. There is a nod to increasing bottlenecks but in general the statement isn’t as dovish or as cautious as feared.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.