Forex Trading Library

Bank of Canada, likely to put monetary policy on hold

0 169

The Bank of Canada meets later this evening to decide on its monthly monetary policy. While previously the markets were expecting to see a back to back rate cut, last week BoC Governor Stephen Poloz gave a speech where he noted that the BoC’s interest rate cut last month was a precautionary move, terming it as an “insurance” against further deteriorating economic conditions. The Governor felt reasonably comfortable that the outlook in the near term would likely improve.

A day later after Poloz’s speech, Canada’s CPI data was released. On the Core, CPI rose to 0.2% from -0.3% decline the previous month while the headline CPI m/m although negative managed to move modestly higher from -0.7% the month before to -0.2% for the month.

Yesterday, Canada’s GDP data showed a month on month improved reading to 0.3%, after posting a decline the previous month to -0.2%.

With no immediate threats to inflation and a modestly higher GDP, today’s BoC rate statement could see a high chance of interest rates being unchanged at 0.75%. The markets would however be focusing on the monetary policy statement, which could continue to carry a dovish statement.

USDCAD – Technical Analysis

The monthly and weekly charts for USDCAD shows a possible pause or probably a sideways market in the near term after the pair rallied to make new multi year highs at 1.2799

bankofcanada1

The daily charts point to a period of consolidation that USDCAD has been going through. Of course, we could expect to see a break out in either direction, but the bias is possible inclined to the downside. A break below 1.23628 will see USDCAD dip lower to 1.2244 followed by 1.2093 (which we believe would be too farfetched at this point in time) and also considering this Friday’s jobs report.

bankofcanada2

After yesterday’s GDP release, the Canadian Dollar managed to gain against the Greenback with the USDCAD falling to 1.2496 but the pair quickly retraced its losses for the day. So despite the fact that a BoC rate hold could be termed bullish for the Canadian dollar in the near term, the overall weakness of the Loonie will mean that any dips will be quickly bought as the major uptrend continues to prevail.

The main risk however as noted will be this Friday’s US Jobs report, which essentially will be seen as bullish as the monthly jobs numbers sit comfortably above the 200k main trend. In this aspect, while USDCAD does offer intraday short opportunities, the fact remains that any shorts will be counter trend to the main uptrend that continues to show signs of a potential move to the upside.

Leave A Reply

Your email address will not be published.