USD/CAD pierces 1.2650s after BoC kept rates unchanged
|- The USD/CAD trims some of Tuesday’s losses up some 0.05%.
- The BoC kept its cash rate unchanged at 0.25%, as expected by investors.
- USD/CAD Price Forecast: Tilted to the downside, but risks to the upside remain.
The USD/CAD is modestly down during the New York session, trading at 1.2654 at the time of writing, after the Bank of Canada (BoC) maintained the Bank Rate unchanged at 0.25%, as market participants expected.
Market Reaction
As witnessed by the 1-hour chart, the USD/CAD pair spiked towards 1.2652, fading the upward move, retreating below the December 7 low around 1.2635,to then rebound where it hovers at press time.
In its statement, the Bank of Canada (BoC) said that it expects CPI inflation to remain elevated in the first half o 2022 but awaits it would moderate by the second half, towards 2%. Furthermore, commented that CPI is elevated, and “the impact of global supply constraints is feeding through to a broader range of goods prices.”
Regarding the economic outlook, the BoC said that the economy had “considerable momentum” into the Q4, including the improvement in the labor market, which brought the employment rate back to its pre-pandemic level. However, floods in British Columbia and uncertainty from the omicron variant “could weigh on growth by compounding supply chain disruptions, cutting demand for some services.”
The BoC commented that “in view of ongoing excess capacity,” the Canadian economy would continue to require monetary policy support and emphasized that they are “committed to holding the rate” until economic slack is absorbed. According to the BoC October projection, that will happen sometime in the middle quarters of 2022.
USD/CAD Price Forecast: Technical outlook
In the 1-hour chart, the USD/CAD has a downward bias, as shown by the hourly simple moving averages (SMA’s) residing well above the spot price. Furthermore, a substantial consolidation around the December 7 low at 1.2635, previous support-turned-resistance, as shown by seven candles rejected by the previously mentioned resistance.
Nevertheless, in the outcome of breaking to the upside, the first resistance would be the daily high at 1.2663. A clear break of that level would expose key resistance levels, with the central daily pivot at 1.2679, followed by the 50-hour SMA at 1.2688, and then the R1 daily pivot at 1.2723.
On the other hand, if 1.2635 holds, that would exert downward pressure on the pair, exposing essential support areas. The first support would be the figure at 1.2600, followed by the S1 daily pivot at 1.2591, and the S2 daily pivot at 1.2547.
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