USD/CAD Daily Forecast – Canadian Dollar Rallies On Hawkish Bank Of Canada

USD/CAD Video 21.04.21.

Test Of Support At 1.2470

USD/CAD gained strong downside momentum and made an attempt to settle below the support at 1.2470 while the U.S. dollar lost some ground against a broad basket of currencies.

The U.S. Dollar Index has recently moved below 91.30 and is trying to get to the test of the support at the 91 level. If the U.S. Dollar Index settles below this level, it will head towards the support at 90.70 which will be bearish for USD/CAD.

Today, foreign exchange market traders focused on the Bank of Canada Interest Rate Decision and the subsequent commentary. The Bank left the interest rate unchanged at 0.25%, in line with the analyst consensus.

BoC stated that it would adjust weekly net purchases of Government of Canada bonds to a target of $3 billion. According to BoC, this adjustment is necessary to reflect the progress made in the economic recovery. The market interpreted BoC decision as hawkish which was very bullish for Canadian dollar.

Canada also reported that Inflation Rate increased by 0.5% month-over-month in March compared to analyst consensus which called for growth of 0.6%. On a year-over-year basis, Inflation Rate grew by 2.2%. Core Inflation Rate increased by 1.4%. BoC stated that inflation would temporary increase closer to 3% in the next few months as a result of base-year effects but will return to 2% on a sustained basis some time in the second half of 2022.

Technical Analysis

USD to CAD managed to settle below the support at 1.2500 and is testing the next support level at 1.2470. In case this test is successful, USD to CAD will move towards the next support at 1.2450.

If USD to CAD declines below 1.2450, it will head towards the support at 1.2425. A successful test of this level will open the way to the test of the support at 1.2400.

On the upside, a move above 1.2500 will open the way to the test of the resistance at 1.2525. In case USD to CAD settles above this level, it will head towards the next resistance at the 20 EMA at 1.2545.

For a look at all of today’s economic events, check out our economic calendar.