Loonie Stabilizes Following Bank of Canada Interest Rate Decision

The USD/CAD held support levels following whipsaw price action following the Bank of Canada’s decision to keep rates unchanged. The dovish backdrop to the BOC’s statement caught some investors off guard, pushing the Loonie lower relative to the greenback. Support is seen near the 20-day moving average at 1.32, while resistance on the current pair is seen near the recent highs at 1.3350.

The Bank of Canada left the 0.50% policy rate unchanged, as economic growth and inflation have been consistent with the Bank’s outlook in the July Monetary Policy Report. Most tellingly, the dynamics of Canada’s GDP growth projected in July remain intact, with economic activity underpinned by household spending and a firm recovery in exports.

However, downside risks remain, notably in the form of uncertainty related to China and emerging markets. Moreover, the Bank reminded that adjustments in Canada’s economy are complex and will take considerable time. The Bank has moved back to the sidelines, and will likely maintain the current ultra-accommodative rate setting through 2016.

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