Canadian dollar is on a tear after Bank of Canada downplayed the recent inflation miss. The bank kept the interest rate unchanged as expected and said that the inflation is broadly in line with the bank’s projections.
The bias of the statement is more towards rate hike rather than the rate cut. This should not come as a surprise as history shows the BOC rates have closely followed that of the Fed.
Technicals – Risks breaching rising trend line support
Support – 1.3380, 1.3343 – 100MA, 1.3292 – 200MA
Resistance – 1.3485 – 50MA, 1.3535 – Mar 9 high, 1.3581 – 10MA
The failure to hold above 5MA and a subsequent break below 50-MA followed by a drop to 1.3447 suggests the sell-off from the recent high of 1.3639 has resumed.
The RSI is bearish below 50.00, the accumulation/distribution line also supports the case for further losses.
I expect the pair to test the rising trend line support of 1.3380. Further losses are to be taken with a pinch of salt, given the RSI would be oversold/close to being oversold by then.
Plus, the treasury yields could rise in the run up to June Fed, while a lot also depends on what happens at the OPEC meeting tomorrow.