The Bank of Canada cut the overnight target rate to 0.5% and the Loonie lost over a cent in a second. There were many predictions of a rate cut although many lacked conviction which was probably why USDCAD reacted like the move was a surprise. The statement was very doveish as well, noting that “real GDP has likely contracted modestly in the first half”. This morning’s Manufacturing Sales data was also weak.
USDCAD is also being supported by the prospect of lower oil prices due to the Iran nuclear deal as well as the on-going slowdown in China. Janet Yellen’s testimony to Congress this morning revealed that the Fed is still on track to hike rates in 2015 providing support to the US dollar against the majors.
It was a fairly quiet overnight session. Slightly better than expected Chinese GDP data helped give AUDUSD a short lived boost until further China equity market declines erased any positive sentiment. The Bank of Japan left policy unchanged although the governor remarks were positive.
Going forward, assessment of Janet Yellen’s Congressional testimony and ongoing questions surrounding Greece and the Iran nuclear deal should keep the US dollar bid against the majors and USDCAD as well.
The intraday technicals are bullish while trading above the 1.2780-1.2820 level looking for a test of 1.3050, although 1.3000 may prove sticky, just because it is a “round number”. The steepness of today’s move has left a huge gap between 1.2790 and 1.2900 which will get back-filled.
Today’s Range 1.2840-1.2930
Chart: USDCAD Weekly with new trading range (green box)