The BOC cuts rate, leaves no hope for positive outlook

The BOC cuts rate, leaves no hope for positive outlook

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.

USDCAhmnjmDH4.png

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.

CADJPYH4rgrg.png

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.

CADCHFfhbH4.png

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.

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The Canadian central bank will make a monetary policy report and announce interest rates on Wednesday, January 20, at 17:00 MT time. Also, the BOC press conference will be held later.

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