While some analysts thought that the Bank of Canada could cut interest rates at today's meeting, punting the decision to October was always the more likely outcome. As my colleague Joe Perry noted in yesterday's BOC Preview report, "The next full update of the Bank's economy and outlook will not be until the October 30th meeting, so the bank may be likely to carry on with its "appropriate" language and continue to "monitor the data" until then."

As it turns out, that's exactly what Stephen Poloz and company opted to do. The BOC opted to leave interest rates unchanged at 1.75%, reiterating that "the current degree of monetary policy stimulus remains appropriate." In its statement, the central bank noted that the economy was working close to potential, highlighted that housing activity was rising faster than anticipated, cited the escalating trade war as a major risk, and emphasized the importance of global developments (read: the US-China trade war) in driving monetary policy moving forward.

 

Market Reaction

Most traders had expected that central bank to be more explicit in setting up a potential interest rate cut in its October meeting; in other words, the BOC's statement was less dovish than generally expected.

As a result, the loonie saw a quick 40-pip rally against most of its major rivals, including the US dollar. Technically speaking, USD/CAD saw a potential false breakout above its 61.8% Fibonacci retracement near 1.3350 yesterday. The pair formed an bearish pin, or inverted hammer, candle yesterday, signaling an intraday shift from buying to selling pressure and marking a possible near-term top:

USDCAD

After today's drop, USD/CAD is testing a near-term bullish trend line around 1.3270. As traders continue to connect the dots between the Fed's aggressive easing and the Bank of Canada potentially holding interest rates steady, the pair could break below this potential area of support and see a deeper retracement toward 1.3200 in the coming days.

This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD breaks above 1.1100 amid EU hopes, US-Sino tensiosn

EUR/USD has hit a new two-month high above 1.11, amid hopes for a fiscal boost in Europe, and as growing Sino-American tensions seem to weigh on the dollar for a change. EZ inflation, US data, Trump's China speech, and end-of-month flows are in play.

EUR/USD News

GBP/USD advances amid US dollar weakness, shrugging off concerns

GBP/USD is trading above 1.23, edging higher amid US dollar weakness and Britain's gradual reopening. Intensifying Sino-American tensions and the Brexit impasse are ignored. 

GBP/USD News

Forex Today: Dollar dives, decoupling from stumbling stocks ahead of Trump's Chinese announcement

The US dollar remains on the back foot, with EUR/USD topping 1.11, despite a worsening market mood related to Sno-American relations. President Donald Trump will announce actions against China following Beijing's tightening of its grip on Hong Kong. 

Read more

Gold pokes $1,721/23 resistance area

Gold prices extend the latest recovery from $1,711 as DXY refreshes two-month low. A confluence of 10-day EMA, nine-day-old falling trend line probes immediate upside. An ascending trend line from April 21 favors the bulls.

Gold News

WTI struggles to cheer USD weakness, drops 1.40% in Asia

WTI probes gradual declines from $34.34, still eyes record monthly advances. DXY bears the burden of risk aversion wave before US President Trump’s China conference. Fears of US-China restrict the black gold’s near-term upside.

Oil News

Forex Majors

Cryptocurrencies

Signatures