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USDCAD Continues the Retreat After Neutral BOC Rate Comments

Today, the USD to CAD rate dropped below 1.37, extending its upward trajectory following yesterday’s FOMC reversal. On Tuesday, we witnessed a 100-pip surge in USD/CAD, propelled by underwhelming Canadian GDP figures and robust US employment earnings, pushing the pair up by 1 cent. However, the Fed changed its stance yesterday, and today, the BOC is making some not-so-dovish remarks, which are seen as hawkish, given the fact that the BOC hinted at the start of a rate cut period in the last meeting, but I assume they’re following the FED.

USD/CAD Chart Daily – Returning Back Dow to the 20 SMA

Earlier this week, the USD/CAD increased by 100 pips, but it retraced its gains after the FOMC meeting and press conference. Despite experiencing fluctuating volatility, the pair found support yesterday within a cluster of technical levels, including the 200-hour moving average and the 100-hour moving average around 1.37. These levels held as support yesterday, prompting us to initiate a buy signal for USD/CAD. But the decline continues today, with the price falling below 1.37.

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BOCs Macklem Testifying Before the House of Commons Standing Committee

  • There’s a limit to how much US and Canadian interest rates can differ.
  • However, we are currently not close to reaching that limit.
  • When questioned about when rates might decrease, he emphasizes that the BOC is seeking assurance that the recent decline in underlying inflation will persist.
  • Canadian inflation is expected to remain around 2.9% for the next few months, partly due to gasoline prices. Rates are unlikely to return to pre-Covid levels.
  • He reiterates that any interest rate reductions would likely follow a gradual path.
  • The central bank could begin cutting rates before inflation reaches 2%, emphasizing the importance of observing a sustainable decline in inflation.
  • If the federal carbon tax were eliminated, inflation would initially drop for a year before returning to its expected trajectory.
  • If interest rate cuts were to weaken the Canadian dollar, this factor would be taken into consideration when determining the extent of rate reductions.

USD/CAD Live Chart

 

USD/CAD
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Skerdian Meta
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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.
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