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USD/CAD: Canadian Dollar Rallies on Interest Rate Hike Prospect

The Canadian Dollar rallied against most currencies, causing the USD/CAD to fall sharply. This CAD strength followed a speech by the Bank of Canada's Senior Deputy Governor Wilkins, which hinted that the central bank is considering raising rates. 

Here's are some notes from economiccalendar.com

USD/CAD dropped sharply after the European close as Bank of Canada’s Senior Deputy Governor Wilkins suggested a rate hike might be in the horizon.

She noted strong growth that was seen across several sectors and a notable pick up in business investments. She was also optimistic regarding the labor markets especially with strong jobs growth in the services sector.

She concluded her speech by stating that although inflation levels remain below target rates the bank may look to act preemptively as monetary policy adjustments can take up to two years before their full impacts are seen on the economy.
The Bank of Canada will revise their forecast ahead of the July meeting and if policy makers believe inflation will reach 2% targets in a reasonable time, a rate hike appears probable.

USD/CAD Daily Chart

(click to enlarge)

Support:
- The daily chart shows USD/CAD falling sharply during the 6/12 session. 
- However, we can see that the overall trend has been bullish for more than a year, since May 2016. 
- Its not a strong bullish trend, and a break below 1.32 could open up a bearish scenario.
- But for now, we should anticipate some buying from the rising trendline and a previous support pivot around 1.3225. 
FOMC:
- The USD/CAD should also see some volatility during the 6/14 session as the FOMC announces its monetary policy. The US central bank is expected to raise the benchmark interest rate from 1.00% to 1.25%. 
- If by the end of this week, price holds above 1.3225, I think USD/CAD still has upside.
- But if price falls below 1.32 by the end of this week, USD/CAD is probably back on a bearish trend in the short to medium-term. 
- In the short-term the 1.30 level will be in sight. If price extends below that, the 1.2460 2016-low will be the next key support.


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