The market will be watching closely to see what now happens around the 1.32 level and whether price consolidates or moves lower. 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. Generally over the last 12 months the USDCAD has moved well from lows near 1.22 up to recent highs above 1.36.
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 which reinforced the significance of these two levels. The USDCAD spent a lot of last 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. The 1.29 level has clearly established itself and will likely continue to heavily influence price action.
After the Bank of Canada (BOC) raised interest rates again in October, after doing so four times since July 2017, the BOC held its benchmark interest rate steady at 1.75% yesterday. This is despite a few dark clouds appearing on Canada's economic horizon.The 1.75% remains the highest the benchmark interest rate been in almost a decade, dating back to December 2008. The bank has been on a rate rising path attempting to keep inflation in an acceptable range, typically between 1 – 3% annually. The central bank downgraded its expectations for Canada's economy this year forecasting 1.7% growth, as the heavy fall in the price of oil since October has had a "material impact" on the economy. The BOC still indicated it plans to raise the rate again sooner rather than later. "The policy interest rate will need to rise over time into a neutral range to achieve the inflation target," the bank said. "By all of our readings, something like 90 per cent of the economy is operating at capacity, having trouble finding workers, struggling to invest and to grow, and so on. So we have to pay a lot of attention to that, while at the same time acknowledging that the economy will always have the stresses of some form of something declining," Governor Stephen Poloz said.
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