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. Generally over the last 12 months the USDCAD has moved well from lows near 1.22 up to recent highs above 1.36. 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.
As widely expected, the Bank of Canada (BOC) left its overnight benchmark rate unchanged at 1.75% for a third straight decision Wednesday, even though the central bank remains keen to lift rates to bolster policy options in the future. From their last statement in January, BOC officials dropped their assertion that rates will need to rise over time, replaced by a mention that the economy continued to require stimulus and that there was “increased uncertainty” about the timing of future increases.In the post-meeting statement, the central bank said the outlook continues to warrant "a policy interest rate that is below its neutral range". That's a significant retreat from its January statement: "the policy interest rate will need to rise over time into a neutral range to achieve the inflation target". Some of the words from the statement indicate the central bank will be holding off on any rate rise, possibly until 2020, whilst there was no hint in the statement that BOC officials contemplated cutting interest rates. “Given the mixed picture that the data present, it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook.”, the statement said.
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