USD/CAD headed to highest daily close of the year above 1.33
|- BoC leaves policy rate unchanged at 1.75% as expected.
- Cautious remarks in the policy statement weigh on the loonie.
- US Dollar Index stays quiet around 97 ahead of Fed's Beige Book.
After spending the majority of the day moving sideways in a tight range below the 1.33 handle, the USD/CAD pair gained traction during the NA session and rose to its highest level since June of 2017 at 1.3399 after the loonie came under a heavy selling pressure following the Bank of Canada's monetary policy statement. As of writing, the pair is trading at 1.3375, adding 0.85% on a daily basis and looking to post its highest daily close in 18 months.
As expected, the BoC left its policy rate unchanged at 1.75% today. However, the bank adopted a very cautious tone in its statement as it drew attention to the negative impacts of falling oil prices on Canada's energy sector and the inflation growth. Commenting on the BoC's publication, "The Bank of Canada acknowledged recent weakness in the energy sector and delivered a dovish message in today's communique. They noted that economic momentum was slowing into Q4, and perhaps most tellingly stated that there was more room for non-inflationary growth," TD Securities analysts said.
Additionally, contradicting headlines surrounding an additional OPEC+ oil output cut caused crude oil to reverse a portion of daily gains to make it difficult for the loonie to find demand.
On the other hand, the greenback stayed resilient against its rivals on Wednesday with the US Dollar Index floating near the 97 handle and didn't allow the pair to make a deep recovery. At the moment, the DXY is up 0.05% on a daily basis at 97.
Technical levels to consider
The initial resistance for the pair aligns at 1.3400 (daily high) ahead of 1.3455 (Jun. 12, 2017 high) and 1.3500 (psychological level). On the downside, supports are located at 1.3250 (daily low), 1.3165 (Dec. 4 high) and 1.3080 (100-DMA).
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