- The Bank of Canada (BoC) kept its key overnight rate at 5%.
- Canadian economic activity grew at its fastest pace in seven months in November.
- Canada posted a larger-than-expected trade surplus of C$2.97 billion in October.
The USD/CAD forecast suggests a positive move in the pair’s favor as the Canadian dollar weakens following the BoC’s decision to keep rates on hold. The Bank of Canada (BoC) kept its key overnight rate at 5% on Wednesday. However, the bank indicated the possibility of another increase. In addition, the BPC has expressed ongoing concerns about inflation.
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Inflation in Canada fell to 3.1% in October, down from a peak of over 8% last year. However, it is still above the bank’s 2% target. Moreover, the bank’s policy statement no longer included language from previous policy about slow progress toward price stability and heightened inflationary risks. Instead, the BPC pointed out that labor market pressures have eased. Moreover, growth slowed in the middle of the year, indicating a drop in demand.
Meanwhile, the dollar has stabilized this month after falling 3% in November. It is stronger due to increased speculation about interest rate cuts by other central banks. The dollar index was just below a two-week high of 104.23 on Wednesday.
Data showed on Wednesday that US private payrolls rose less than expected in November, pointing to a gradual cooling in the labor market.
Meanwhile, Canadian economic activity grew at its fastest pace in seven months in November, according to data released Wednesday. In addition, Statistics Canada reported a larger-than-expected trade surplus of C$2.97 billion ($2.19 billion) in October.
USD/CAD Key Events Today
USD/CAD Technical Forecast: Bearish trend giving way to bullish momentum
On the technical side, there was a reversal of the trend from bearish to bullish. Buyers took control at the 1.3500 support level after the RSI made a bullish divergence. However, they did not show much strength at first. However, the price broke above the 30-SMA with a solid bullish candle. At the same time, the RSI moved into bullish territory above 50.
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However, the bullish move quickly stalled at the key resistance level of 1.3600, leading to consolidation. Furthermore, the price is facing a strong resistance trend line. A break above this resistance zone would allow the bulls to retest the key 1.3700 level. However, if the resistance holds, sellers could continue the downtrend.
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