USD/CAD Exchange Rate Prediction – The Loonie Gains Traction Following BOC Decision

The USD/CAD whipsawed following the Bank of Canada decision. The Central bank said that that it was ending net new purchases through its bond purchase program, and it announced that it was moving up the timeline that it would raise rates. The Loonie ended the trading session in the black. U.S. yields were mixed, with the 2-year Treasury yield continuing to rise, while the 10-year declined.

Technical Analysis

The Loonie gain traction in the wake of the BOC decision. Prices slipped below support now resistance at the 10-day moving average at 1.2360.  Additional support is seen near the July lows at 1.2308. Resistance is seen near the 50-day moving average at 1.2582. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. This flip-flopping of buy and sell signals generally reflects consolidation. Prices are oversold. The fast stochastic is printing a reading of 17, below the oversold trigger level of 20. Medium-term momentum is about to turn positive as the MACD (moving average convergence divergence) index is poised to generate a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

The Bank of Canada took a significant step toward tightening rates by ending net new purchases through its quantitative easing program. The BOC also announced that it was moving up its timeline for raising rates.  The bank left its benchmark overnight interest rate unchanged at 0.25%, as expected.