The BOC carried out the perfectly setup rate hike possible over the last week and this has helped the CAD to climb in a very controlled market all across the market. This has forced a lot of pressure on the USDCAD pair which has broken through 1.29 and then 1.28 during the course of the week and has closed the week near the lows of the range. This does not bode well for the bulls in this pair in the upcoming week.
USDCAD Down in the Dumps
The slide started around a couple of months back on speculation and due to the improving economic data from Canada. The CAD made progress against the USD despite the hike in rates from the US. The BOC confirmed that something was brewing on their side a month back. They said that they were near the end of the rate cut policy and that they would soon look to reverse their rate policy. This was an early indication given to the market by the BOC that they were looking to hike rates and this pushed the USDCAD pair down even further in anticipation.
And like a good central bank, they followed through on their promise by hiking the interest rates last week by 0.25% and this helped the CAD appreciate against the dollar by another 200 pips. A perfectly timed and a perfectly setup rate hike, by all means and the BOC also kept the door open for further hikes by saying that they would study the impact of the higher rates before they consider any further moves. This has set the CAD on a hawkish path and this is likely to last in the short term. With the oil prices also showing signs of recovery, the USDCAD bulls are likely to have a hard time.
Looking ahead to the coming week, we have the retail sales and the CPI data from Canada and we have to see whether this continues the trend of improving data from Canada. It will be too soon to study the impact of the rate hike just yet but enough hints are likely to be known in the upcoming week, which we suspect would continue to be bullish for CAD.
This article was originally posted on FX Empire