The Canadian dollar surged against its US counterpart after Bank of Canada kept interest rates unchanged at 1.25% as expected, but changed rhetoric about future rate moves, which boosted the loonie. The central bank left rates unchanged but said that higher rates will be warranted to keep inflation near-target, however, gradual approach to policy adjustments will be guided by incoming data.
Hawkish tone from BoC boosted Canadian dollar which managed to recover over 50% of the most recent fall from 1.2742 to 1.3046.
The USD CAD pair dipped to session low at 1.2865, from daily high at 1.3040, which lays just under Monday’s nine-week high at 1.3046. Today’s strong fall signals reversal and failure on probes above psychological 1.30 barrier.
Fresh weakness returned to thick weekly cloud (cloud top lays at 1.2927) and cracked initial support at 1.2886 (rising 10SMA).
Further easing faces a cluster of supports provided by daily MA’s (20/30/55) within 1.2864/32 zone), break of which is needed to confirm reversal, as another pivotal support lays in the zone (Fibo 38.2% of 1.2527/1.3046 recovery rally at 1.2848).
Daily RSI and momentum turned south while slow stochastic reversed from overbought territory, showing a plenty of space downside, and support the notion.
Res: 1.2885; 1.2927; 1.2988; 1.3000
Sup: 1.2865; 1.2848; 1.2832; 1.2787
