USD/CAD Moves Lower After BoC Interest Rate Decision

U.S. Dollar Declines Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2590 while U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently stuck in the 96 – 96.25 range. A move above the high end of this range will push the U.S. Dollar Index towards 96.50 which will be bullish for USD/CAD.

Today, the Bank of Canada announced its Interest Rate Decision and provided commentary. The rate was left unchanged at 0.25%, in line with analyst expectations.

BoC noted that Canada’s GDP growth in the second half of 2021 was stronger than expected and added that the economy entered this year with “considerable momentum”.

Currently, the Bank expects that Canada’s economy will grow by 4% in 2022 and by 3,5% in 2023. In this light, the Bank announced that “Governing Council […] decided to end its extraordinary commitment to hold its policy rate at the effective lower bound”.

While BoC statement is important, the main event of the day for foreign exchange market traders is the Fed Interest Rate Decision. The commentary from Jerome Powell will determine the dynamics of the U.S. dollar for the upcoming weeks.

It should be noted that WTI oil moved towards the $88 level amid rising tensions over Ukraine, which was bullish for commodity-related currencies, including Canadian dollar.

Technical Analysis

USD to CAD is currently trying to get below 1.2590. In case this attempt is successful, USD to CAD will move towards the next support level which is located at 1.2550.

A successful test of the support at 1.2550 will push USD to CAD towards the next support at 1.2525. If USD to CAD declines below this level, it will move towards the next support level at 1.2500.

On the upside, the nearest resistance level is located at the 20 EMA at 1.2605. If USD to CAD settles above this level, it will head towards the resistance at 1.2625. A successful test of this level will open the way to the test of the resistance at 1.2650.

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