BOC: the rate cut pulls the CAD

What happened?

The outcome of today’s rate decision of the Bank of Canada was not too shocking after the rate cut by the Fed. Still, an announcement of a rate cut by 50 basis points instead of 25 basis points expected by the market was surprising. The shift from 1.75% to 1.25% was a reaction to the weaker outlook amid coronavirus threats.

How did the market react?

USD/CAD initially spiked above the 1.34 level after the release on H4, opening the way for bulls to the next key resistance at 1.3460. It’s worth mentioning that the trading of a pair has been very volatile within a day, as it has also tested the levels below the 1.3344 support.

CAD/JPY has fallen to the lowest levels since last October. On H4, the pair has tested the 79.95 level. The next support in the focus of bears lies at 79.82.

As for CAD/CHF, the pair has tested the lows of May 2017 at 0.7122. If it’s broken, the slide to the 2016 lows at 0.7060 will be expected. Upside momentum is limited by the 0.7207 level.

What’s next?

The central bank did not exclude the possibility to apply more measures if needed. On Thursday, it is recommended to follow the comments by the BOC Governor Stephen Poloz at 19.45 MT time. His speech may contain some details on further actions by the bank.

Let's not forget about the OPEC meeting tomorrow. The decision on oil output may also move the CAD, as it is commodity-linked currency.

boc - bank of canada

cad - canadian dollar

central bank meeting

interest rates

usd

chf - swiss franc

jpy - japanese yen

Ekaterina Gorbatenko

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