Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
New Beginning for the Canadian Dollar
2022-06-03 • Updated
Recently, the Bank of Canada hiked the interest rates by 50 basis points. It is now 1.5%, and it’s only the beginning. The policy rate may directly go to the top, or even above, what the Bank of Canada considers its “neutral range,” estimated at 2-3%. These measures can push the CAD higher against other currencies.
Moreover, Canada’s economy recorded a surge in trade with the rest of the world in March, as rising prices for commodities coupled with strong domestic demand and a smoother global supply chain drove imports and exports.
Imports jumped 7.7 per cent in March to $61.1 billion (US$47.7 billion), while exports were up 6.3 per cent to $63.6 billion, Statistics Canada reported on Wednesday. The nation’s surplus narrowed to $2.5 billion, from a revised $3.1 billion in February.
We’ll take a look at two pairs. First is USDCAD. The pair is near the support trendline, which prevents the USD from falling for more than a year. We can expect another touch of the line, but the breakout is not a must-have right now. The bounce from the trendline will probably result in the consolidation for another month or two. If the price breaks through the support, the downtrend for the USD will continue.
USDCAD daily chart
Resistance: 1.2370, 1.2800, 1.2890
Support: 1.2450, 1.2300
Another chart worth looking at is CADJPY. We can clearly see a fractal that happened in 2012; the movement seems similar, and we can expect the pair to move higher. CADJPY may reach 106.50 before the end of the uptrend. That aligns with our prospects for the Canadian dollar.
CADJPY Weekly chart
Resistance: 101.20, 104.00, 106.50
Support: 97.80, 93.20, 91.50
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As you must already know, the direction of Gold is mainly dependent on the Price action of DXY (US Dollar index). So first, we take a look at the US Dollar index.
On January 12, the Bureau of Statistics will publish the Consumer Price Index (CPI) figures, a key index for determining interest rates. While we await the release, experts forecast a decline in the CPI data, a hint at weaker Dollar values in the global markets.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates?
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.