The Bank of Canada has decided to keep interest rates at 5.0% for the fifth time in a row, it announced yesterday, as it continues to look for clearer signs that inflation is moving closer to the bank’s 2% target before considering rate cuts.
According to Bank of Canada Governor Tiff Macklem:
→ the Bank is concerned that underlying inflationary pressures remain.
→ It is too early to ease restrictive policies. There is a clear consensus within the Board of Governors that the time has not come (for rate cuts).
→ We are now in a difficult phase of the monetary cycle.
These hawkish statements contributed to the Canadian dollar strengthening against other currencies, in particular against the US dollar.
Technical analysis of the USD/CAD chart today shows that:
→ for most of 2024, the price moves within the channel shown in blue;
→ yesterday’s news lowered the price from its upper limit to the median;
→ the psychological level of 1.36 retained its role as resistance, although the bulls repeatedly tried to overcome it.
If the bears maintain the initiative, the price of USD/CAD may fall below:
→ breaking through the median line of the channel;
→ breaking through the local trend line (shown by the orange line);
→ attempting to break through the psychological level of 1.35.
In this scenario, the most obvious target for bears may be the lower boundary of the channel, with news about inflation and interest rates remaining the main drivers in the USD/CAD market. Today, by the way, at 16:15 GMT+3, the decision on interest rates from the ECB will become known — be prepared for surges in volatility.
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