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USD/CAD Daily Price Forecast – Loonie Gained Upper Hand Post BOC Update But Gains were Limited

Colin First

The USD/CAD pair struggled to build on the post-BOC goodish rebound from one-week lows and remained under some selling pressure for the third consecutive session. However the upside move was limited due to hawkish forward guidance from BOC yesterday.  At the October meeting on Wednesday, the Bank of Canada (BOC), as was widely expected, decided to raise the policy rate by 25bps points to 1.75%, marking the third hike this year. The market, however, was thrilled by the central bank’s hawkish commentary, pointing to need to raise interest rates at a faster pace than it has been doing over the past year and a half. The pair tumbled over 130-pips in reaction to the announcement but managed to recover over 50% of the intraday slump amid a goodish pickup in the US Dollar demand.

USD’s Safe Haven Demand Served as Limiting Factor For Loonie’s Momentum

As of writing this article, USDCAD pair is trading at 1.3023 down by 0.25% on the day but price action seems to have found stable support at 1.3000 price handle. The global flight to safety, triggered by a fresh round of selloff in the US equity markets, drove some safe-haven flows to the greenback and assisted the pair to rebound around 85-pips from the daily swing low and continues to act as main reason for USD’s foothold above 1.30 handle. The USD up-move however, lacked any strong follow-through for majority of today’s trading session and was seen as one of the key factors exerting some fresh downward pressure on the major. The pair has so far maintained a range bound price action above 1.30 handle.

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Even the ongoing slide in the crude oil prices, which tend to undermine demand for the commodity-linked currency – Loonie did little lend any support or help regain positive traction. Market participants now look forward to the US economic docket, highlighting the release of durable goods orders data, for some fresh impetus later during the early North-American session. From technical standpoint, the key 1.30 psychological mark now seems to act as an immediate support, which if broken might now drag the pair below the 1.2970-65 area (overnight swing lows) towards testing the very important 200-day SMA support near the 1.2915 region. On the flip side, 100-day SMA, currently near the 1.3070 region, now becomes an immediate strong hurdle, above which the pair is likely to surpass the 1.3100 handle and head back towards retesting the 1.3125-30 heavy supply zone.

This article was originally posted on FX Empire

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