USDCAD Continues the Bounce After the BOC 25 bps Rate Cut
The USD to CAD rate has been trading in a triangle, and today’s rate cut from the BOC did not provide a breakout for USD/CAD. The pair challenged the 50 SMA (yellow) at the bottom earlier this week, following softer US economic figures, but sellers couldn’t break the 50 SMA which has been acting as support and has bounced more than 100 pips higher, however the price still remains within the triangle.
This forex pair surged more than 300 pips higher in early April, with the price reaching 1.3845. However, we saw a reversal lower back then, as the economic data from the US has been getting softer, sending the USD lower. However, the 50 SMA(yellow) has been acting as support at the bottom, sending the lows higher, thus forming a triangle. Yesterday USD/CAD bounced off the 50 SMA as investors started to prepare for the rate cut by the Bank of Canada, while today the upside is stretching further after the BOC monetary policy decision.
USD/CAD Chart H4 – Can the 200 SMA Hold for Long
Bank of Canada Interest Rate Decision, 5 June 2024
- The Bank of Canada cut rates by 25 bps to 4.75% at its June 2024 interest-rate decision, as expected.
- Previous BOC interest rates were 5.0%
The BOC Statement
- Data-Dependent Rate Decisions: The Bank of Canada will make interest rate decisions on a meeting-by-meeting basis, considering the latest economic data. If the economy performs as expected and inflation continues to ease, further rate cuts can be anticipated.
- Inflation Target Commitment: The central bank remains determined to bring inflation back to its 2% target. Despite progress, the work to control inflation is ongoing, and decisions will be made carefully based on evolving economic conditions.
- Confidence in Inflation Control: Confidence that inflation will continue to trend towards the 2% target has increased. Total CPI has consistently declined throughout 2024, and indicators of underlying inflation suggest a sustained easing.
- Potential Risks: Macklem noted that inflation could rise if global tensions escalate, Canadian house prices increase faster than anticipated, or if wage growth outpaces productivity.
- Economic Performance: Although Q1 growth was weaker than the bank had forecast in April, there were positive signs in consumption growth, business investment, and housing activity. The economy is currently in excess supply, providing room for growth even as inflation trends downwards.
- Future Rate Cuts: It is reasonable to expect more rate cuts if the easing of inflation continues. However, progress in reducing inflation is likely to be uneven, and risks remain present.
USD/CAD Live Chart
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