USD/CAD to Head for 1.30 as the BOC Intends to Keep Rates Higher for Longer
The decline in crude Oil should have kept the CAD weak, but it has been showing resilience instead, with sellers being in charge of USD/CAD since early November. They pushed the price around 7 cents lower, sending this pair to 1.33 lows yesterday, with moving averages acting as support on the H4 chart.
This forex pair turned bearish after failing to hold gains above the resistance zone around 1.39. Buyers were attempting this resistance zone, but the USD lost the momentum as the FED started giving dovish signals, and this pair reversed sharply, plunging around 700 pips lower in the meantime. The decline stalled at 135 for some time, but it resumed again last week after Jerome Powell confirmed that rate cuts are coming.
This goes in favour of the CAD, which has several things supporting it at the moment, including the weaker US dollar due to a dovish FED, as inflation slows considerably in the US. In Canada, the headline CPI (consumer price index) inflation remained stagnant in November at 3.1% beating expectations of a 2 point decline to 2.9%, while core CPI YoY ticked higher to 2.8% from 2.7% previously. This is keeping the Bank of Canada hawkish yet, intending to keep interest rates higher for longer, as the minutes below show.
Yesterday, the EIA reported an increase in crude inventories, but Oil ignored the numbers, continuing its upward momentum, as Crude Oil supply lines face a minor constraint after many corporations temporarily ceased sending Crude oil supplies through the Red Sea shipping lane following attacks on numerous vessels. This is another factor which goes in favour of the CAD, so we are looking to sell retraces higher in this pair.
Comments in the BOC Minutes from the Last Meeting
- Agreed the likelihood that mon pol was sufficiently restrictive had increased
- Agreed that risks to the inflation outlook remained and it might still be necessary to hike
- Expressed concern that shelter price inflation could remain elevated, which could make it more-difficult to return inflation to 2%
- Felt and significant and sustained increase in new home construction would be needed to resolve long-standing structural shortage in supply
- Agreed mon pol couldn’t solve housing supply problems
- Considerable uncertainty surrounding the outlook for inflation
USD/CAD Live Chart
ABOUT THE AUTHOR
See More
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals