Continues to Enjoy Support from 1.29 after BOC Survey
The last few weeks have seen the USDCAD move sharply in both directions, reaching a two week high around 1.3080 before falling sharply to a four-month low below 1.28 before surging higher again towards 1.3080. In the last week, the USDCAD has eased lower, however, enjoyed support again from the well-established 1.29 level allowing it to climb higher. Several weeks ago the USDCAD bounced solidly off this key level as the buyers were prepared to jump in again and push the USDCAD a little higher, after dropping sharply from recent resistance around 1.32. At the end of August, the USDCAD surged higher strongly from the support at 1.29 up to reach a six week high just above 1.32.
The USDCAD settled a little for around a week right around the 1.32 level. The USDCAD has spent a lot of this year trading roughly around 1.29, therefore, it would have been of little surprise that this level did provide support to the USDCAD again and why it remains a key level. Generally, over the last few months, the USDCAD has drifted lower from highs near 1.34. For most of July the USDCAD had been content to consolidate in a narrow range right around 1.32 for several weeks, after surging higher to a new 12 month high near 1.34 towards the end of June, however, it has now left that range.
Around mid-April, the USDCAD surged higher for several days moving its way back to the previous resistance level of 1.29 before it ran into a wall of selling. Significantly, this level stood firm for several weeks repelling prices and proving to be a significant obstacle. The 1.29 level has clearly established itself and will likely continue to heavily influence price action.
After coming to an agreement on a new version of North American Free Trade Agreement (NAFTA), called the U.S.-Mexico-Canada Agreement or USMCA, the likelihood that the Bank of Canada (BOC) will raise rates more often than the two rate increases that had been expected for 2019 has risen. The BOC’s quarterly survey of businesses showed that Canadian business optimism remained at near record levels in the third quarter and that companies reported rising pressure on capacity, labour and prices amid signs of stronger sales.“The indicator of future sales growth increased and is positive, suggesting a faster pace of growth over the next 12 months,” the survey said, citing continuing strength in both domestic and export demand.“Many businesses reported upward pressure from tariff increases, particularly those on steel and aluminium, and higher prices for various commodities,” the survey said. The central bank report released on Monday firmed up market forecasts of another interest rate increase next week. The bank carefully studies the forward-looking business outlook survey ahead of rate decisions. The BOC has raised rates four times since July 2017 and most market participants expect another rise next week on 24th October.