- USD / CAD trimmed some of Tuesday’s losses, climbing as much as 0.05%.
- The BoC kept its cash rate unchanged at 0.25%, as expected by investors.
- USD / CAD Price Forecast: Sloped lower, but risks to the upside persist.
The USD / CAD it has declined modestly during the American session, trading at 1.2654 at the time of writing, after the Bank of Canada (BoC) kept the bank rate unchanged at 0.25%, as expected by market participants.
Market reaction
As the 1 hour chart attests, the USD / CAD pair spiked towards 1.2652, fading the bullish move, retreating below the December 7 low around 1.2635, then bouncing back to where it was at press time.
In its statement, the Bank of Canada (BoC) said that it expects CPI inflation to remain high in the first half of 2022 but expects it to moderate in the second half, towards 2%. In addition, he commented that the CPI is high and that “the impact of the limitations of the world supply is being transferred to a wider range of prices of goods.”
Turning to the economic outlook, the BoC said the economy had “considerable momentum” in the fourth quarter, including the improvement in the labor market, which brought the employment rate to its pre-pandemic level. However, the flooding in British Columbia and the uncertainty of the omicron variant “could affect growth by exacerbating supply chain disruptions and reducing demand for some services.”
The BoC commented that “in view of the ongoing overcapacity”, the Canadian economy would continue to require monetary policy support and emphasized that they are “committed to maintaining the rate” until the economic slack is absorbed. According to the BoC’s October projection, that will happen sometime in the middle of the 2022 quarters.
USD / CAD Price Forecast: Technical Outlook
On the 1-hour chart, USD / CAD is biased to the downside, as shown by the hourly Simple Moving Averages (SMAs) that are well above the pair’s price. Also, a substantial consolidation around the December 7 low at 1.2635, previous support turned into resistance, as shown by seven candles rejected by the aforementioned resistance.
However, in the result of a break to the upside, the first resistance would be the daily high at 1.2663. A clear break out of that level would expose key resistance levels, with the daily center pivot at 1.2679, followed by the 50 hourly SMA at 1.2688, and then the daily R1 pivot at 1.2723.
On the other hand, if 1.2635 holds, that would put downward pressure on the pair, exposing essential support areas. The first support would be the figure at 1.2600, followed by the S1 daily pivot at 1.2591 and the S2 daily pivot at 1.2547.
Technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
