USD/CAD Crashes Lower on Hawkish BOC

The USDCAD pair fell hard during the course of trading yesterday as a combination of weak data from the US and some strong sentiment from the BOC sent the USD and the CAD in opposite ways and this led the pair lower. After threatening to push through the 1.30 region for good, it has been forced to scale back its heights and we now see the pair in the 1.28 region again.

USDCAD Back in 1.28 Region

The USDCAD pair has been one of the most volatile pairs around over the last couple of months with the pair making a trip to the 1.34 region and then moving back down to the 1.25 region and now looking to rebound back above 1.30. These actions have been caused by a combination of the dollar strength and also the varying expectations of the CAD and what the BOC is likely to do in the coming months. While the Fed seems to have set its sights on having atleast 2 more rate hikes during the course of this year, it is the BOC which is likely to be the surprise package.

The BOC is known to be a very hawkish bank and even yesterday, during its monetary statement, it expressed happiness and bullishness over inflation and growth and this has led to the belief that they would be looking to hike rates in the near future, in fact as soon as the month of June. This led to the strengthening of the CAD while on the other hand the dollar weakened due to the weak ADP and GDP data as well.

Looking ahead to the rest of the day, we might see some consolidation during the course of the day as the traders wait for the employment data from the US in the form of NFP tomorrow. It is likely that the pair would continue to chop around even after the data as the bulls and the bears wrestle for control.