Governor Macklem press conference: the central bank can’t put a rate cut schedule on the calendar.

The Bank of Canada kept interest rates at 5% as expected, however, the USD/CAD still took a dive after the announcement. Before the BoC announcement, the Loonie was trading at 1.3575 and dropped around 77 pips to a day low of 1.3498 before recovering some ground.

Forecasts of keeping the Overnight Rate at 5% were seemingly the consensus, but the Canadian dollar managed to gain around 40 pips against the US dollar before the press conference started. Governor Macklem’s words sent the US dollar further south by another 37 pips.

Macklem also said that the current level of inflation at 2.9% was still too far above the central bank’s target of 2%. It’s looking like a cut already in June is losing its chance fast. Leading to a market sentiment more aligned with a possible first cut in July.

From the day chart above we can see a bearish overall picture. The last red candle is longer than the previous 15 candles. This type of move is consistent with a change in sentiment and direction.

Price action attempted to break the cloud over the past few days and may have stalled. But the Lagging Span (green line) bounced off the top side of a cloud today. For those not familiar with the Ichimoku system, to consider price action is above the cloud, the Lagging Span also must clear the cloud.

We could be seeing some further downward price action in the coming days, especially as it seems the US dollar is taking a beating as the Fed gets closer to the pivot point on rates. Or at least the perception is that the turning point for lower rates is closer.

In fact, the DXY dropped 25 pips after Fed chair Powell’s testimony, and was down around 60 pips for the day at 103.20, before recovering some ground.