USD/CAD Exchange Rate Prediction – The Canadian Dollar Strengthens Slightly Following BOC Decision

The USD/CAD edged higher on Wednesday as the Bank of Canada kept rates unchanged but reduced its bond purchase program. This move came during general dollar weakness as the greenback fell against most major currencies. The Canadian Central Bank also said that economic conditions had improved enough to reduce its weekly purchases of federal bonds to $2 billion from $3 billion. U.S. PPI came out stronger than expected by Fed Powell’s commentary that the Fed would leave rates unchanged and that the economy was not strong enough yet to handle a rate increase weighed on yields and the greenback.

Technical Analysis

The USD/CAD moved lower but remained above support near the 10-day moving average near 1.2446. Resistance is seen near the April highs at 1.2656. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in positive territory with a declining trajectory which points to consolidation. Short-term momentum is flat and neutral as the fast stochastic continues to chop sideways, reflecting consolidation.

The BOC Left Rates Unchanged

The Bank of Canada kept overnight rates unchanged at 0.25%, with the Bank Rate at 0.5% and the deposit rate at 0.25%. The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. The increase in output allows the Central Bank to ease its quantitative easing (QE) program, which is being adjusted to a target pace of $2 billion per week. This adjustment reflects continued progress towards recovery.