USD/CAD Daily Forecast – Canadian Dollar Retreats After BoC Interest Rate Decision

U.S. Dollar Gains Ground Against Canadian Dollar

USD/CAD made an attempt to settle above 1.2760 but lost momentum and declined below 1.2700 while the U.S. dollar gained ground against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the 20 EMA at 92.60 and made an attempt to settle above the next resistance at 92.80 but failed to develop sufficient upside momentum. In case the U.S. Dollar Index settles above 92.80, it will move towards the resistance at 93.10 which will be bullish for USD/CAD.

Today, foreign exchange market traders focused on the Bank of Canada Interest Rate Decision. The Bank left the interest rate unchanged at 0.25% and maintained its current pace of asset purchases at CAD $2 billion per week.

The Bank noted that Canada’s GDP declined by 1% in the second quarter which was weaker than expected.  The Bank added that recovery required extraordinary monetary policy support. The comments were dovish and put pressure on the Canadian dollar.

Meanwhile, WTI oil moved back above the $69 level which was bullish for commodity-related currencies, but traders ignored the developments in commodity markets as they focused on BoC Interest Rate Decision and the subsequent commentary.

Technical Analysis

USD to CAD has recently declined below the support level at 1.2685 and is moving towards the next support at 1.2650.

In case USD to CAD settles back below 1.2650, it will head towards the support at 1.2625. A successful test of this level will open the way to the test of the support at the 20 EMA near 1.2610.

On the upside, USD to CAD needs to get back above 1.2685 to have a chance to develop upside momentum in the near term. The next resistance level for USD to CAD is located at 1.2710.

If USD to CAD manages to settle above 1.2710, it will head towards the resistance at 1.2730. A successful test of this level will open the way to the test of the resistance at the recent highs at 1.2760.

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