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Loonie Drops to 6-year lows Following BOC Rate Cut
The USD/CAD surged to a new 6-year high following the surprise rate cut by the Bank of Canada on Wednesday and the solid Beige book results from the Federal Reserve. The next level of resistance for the currency pair is the March 2009 highs near 1.3060. Support is seen near the 10-day moving average at 1.2740. Momentum is strong as the MACD continues to print in positive territory with an upward sloping trajectory.
The Bank of Canada cut rates yesterday and signaled that if needed it can cut rates again or use other tools, such as asset purchases. The 25 basis points reduction in the lending rate was somewhat surprising to market participants given the mixed signals the economy has been sending.
Janet Yellen was as upbeat in her semiannual speech to congress. She was upbeat on jobs as she was impatient on inflation. She said “the economy has made further progress toward the Federal Reserve’s objective of maximum employment, while inflation has continued to run below the level that the Federal Open Market Committee (FOMC) judges to be most consistent over the longer run with the Federal Reserve’s statutory mandate to promote maximum employment and price stability.”
Data in the U.S. continues to be robust, with producer prices coming in hotter than expected on Wednesday and Industrial Production also beating expectations. The interest rate differential continues to favor the greenback, making it likely that the currency pair will post a decade old high.
The post Loonie Drops to 6-year lows Following BOC Rate Cut appeared first on Forex Circles.
