USDCAD trend direction

14 April, STO, Limassol – Looking at the USD’s past evolution against the CAD, we can see that on Wednesday (after the Bank of Canada announced it will maintain the interest rate unchanged and revised up the economic growth rate) the USD lost significant ground against its Canadian counterpart. The USDCAD trend hit 1.2754, the lowest level since July 2015 – down from a daily high of 1.2830. BoC (Bank of Canada) kept the overnight deposit rate unchanged at 0.5% (the level of July, 2015).

Passing to the global perspective, Canadian analysts expect the world-wide economy to go up from a 3% growth rate in 2016 to 3-5% in the following 2 years. This is a weaker prospect than the one in January as per the BoC statement in the announcement.  The economic growth forecast for Canada In 2016 went up though, having as back-up the fiscal measures announced in the March federal budget. The latest Bank of Canada’s release raised the 2016 forecast for economic growth from the previous 1.4% to 1.7%. For 2017 tough, the growth index was reduced slightly, from 2.4% to 2.3%.

Inflation continues to be in line with anticipations for which regards Canada, the total CPI (Consumer Price Index) inflation coming under the bank’s 2% target. Forecasts are announcing further easing before the trend will return close to the target. In the statement following the announcement, BoC said that the oil and commodities prices are slightly above the foreseen values for the month of January, but they still remain under the historical averages. For any future rate cuts coming from the Canadian authorities, the actual figures will need to come well under the forecasted values. Given the fact that core inflation is already close to its target and the CAD took a steady rhythm, this is unlikely to happen in the near future. The BoC is not expected to change its perspective until 2107, moment when they might consider a rate hike.

Despite good news, USDCAD pair went up 0.42% yesterday reaching the 1.2826 threshold and moving closer to the 1.3051 resistance line (20-days SMA on daily). Moving over this value, the trend might set up a further path towards the 1.3280 resistance (23.6% Fibonacci of 1.4692-1.2750) followed by 1.3391 (200-days SMA on daily). On the other hand, if the USDCAD trend direction maintains its strength, it is expected to see the pair to move towards 1.2700 support (psychological level), closely followed by 1.2652 level (the low of July, 10 2015). Regarding the oscillation indicators, we can notice that the RSI(14) is oversold since the beginning of February, when the Canadian currency was supported by the 40% gain in oil price due to the Saudi Arabia, Russia and other OPEC (Organization of Petroleum Exporting Countries) members discussion over a possible output reduction.

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