- Canadian dollar falls across the board after Bank of Canada cut rates by 50bps.
- USD/CAD could post highest daily close since June if ends above 1.3400.
The USD/CAD pair rose from a daily low of 1.3327, reached seconds before the announcement of the Bank of Canada’s (Boc) policy decision, to 1.3416, hitting the highest level since early Monday.
The BoC reduced the key interest rate by 50 basis points to 1.25%. A cut was expected, the question was by how much. The move was more dovish than expected and weakened the loonie.
As of writing, USD/CAD is hovering around 1.3400, holding above the 1.3390 resistance. A consolidation above 1.3400 could clear the way to more gains. The next resistance might be seen at 1.3435 and then at 1.3465 (last week high). While if the pair manages to slide back below 1.3390, the bullish pressure will likely ease.
Prior to the decision, since Monday’s Asian session, the pair was moving in a range between 1.3390 and 1.3315. While currently trading above the upper limit, a confirmation of the breakout is yet to be seen. A somewhat weaker US dollar on Wednesday against commodity currencies, lower US yields, and the recovery in crude oil, could limit gains for USD/CAD. On the flip side, is the dovish statement from the Bank of Canada.