USDCAD

10:11, 23 April

Settles Under Resistance at 1.34 as BOC Expected to Sit Until 2020

In the last few weeks the USDCAD has traded within a narrow range and consolidated under the current key level of 1.34 which is also offering resistance to the currency pair moving higher. The USDCAD did pop up above this level a couple of times last month including reaching a two month high above 1.34, however it was quickly sold off and fell back below this level quite quickly. 
This along with the recent price action over the last few weeks reinforces how significant this level currently is.

Up until recently the USDCAD was being ably supported by another key level in 1.32 however it has given way a little a couple of months ago. This level however has remained the baseline for its price action in the last several months and may be called upon again shortly to offer some support should the USDCAD fall away from its current trading range. The USDCAD still has some distance to travel if it is to make up the losses from the first week of the year which saw the it move sharply from an 18 month high above 1.36 down to the key level of 1.32, however it is currently looking more likely than not.

Throughout the last 12 months the 1.32 level has been significant for the currency pair so it wouldn’t have surprised too many to see some buying to support the price and provide some stability. For several months in the second half of 2018 the 1.32 level was significant repelling prices lower although in November this level was cleared, which then saw the 1.32 level propping up prices. The other key level although a little more distant is the well-established 1.29 level which has supported the currency pair well in the last few months.

As recently as last month, the Bank of Canada (BOC) declared its enthusiasm to lift rates to bolster policy options in the future.  The BOC mentioned that the economy continued to require stimulus and that there was “increased uncertainty” about the timing of future increases.  In a recent Reuters poll, economists expect the BOC to hold policy steady for the rest of this year, with calls for the next rate rise in early 2020 still no certainty.  All economists polled said the central bank will hold rates at 1.75% at its 24th April meeting and approximately 60% of the economists say the rates will stay steady until the end of this year.  Significantly, these expectations bring the BoC in alignment with the U.S. Federal Reserve and other major central banks, which are now expected to keep rates steady for the remainder of 2019.  Canada’s economy has been impacted by the compulsory production cut of oil, its biggest export, declining business sentiment and a slowdown in the housing market.