This morning, the Bank of Canada held its April monetary policy meeting and decided to maintain the overnight interest rate at 4.50% for the second time consecutively. This decision was consistent with market predictions, resulting in a slight decrease of approximately 0.08% in USD/CAD after the announcement.
The statement reiterated previous guidance and acknowledged the bank’s readiness to increase borrowing costs in order to stabilize prices. This suggests that the tightening cycle may not be concluded despite the current decision to maintain rates.
Regarding the economy, policymakers have recognized that the labor market presently remains constricted, while growth is performing more favorably than expected. Inflationary pressures are also diminishing, albeit policymakers acknowledged that achieving the target of 2.0% inflation may prove challenging due to underlying price dynamics.
The central bank has revised its GDP estimate for 2023, raising it from 1.0% to 1.4%. However, the inflation outlook shows little change, suggesting that consumer prices are following recent assumptions. The updated projections are summarized in the table below.
GBP/USD - PRICES, CHARTS, AND ANALYSI
The prevailing sentiment indicates that the Bank of Canada (BoC) will exercise prudence by adopting a watchful stance, while reserving the option to recommence its policy of tightening should the inflationary environment deteriorate or if new data warrants it. This inclination is expected to bolster the Canadian dollar in the short run.
USD/CAD 5-MINUTE CHART
USD/CAD TECHNICAL ANALYSIS
The USD/CAD currency pair has experienced a notable retreat from its peak of last month, yet has thus far failed to breach a crucial upward sloping trendline that has persisted for almost a year. Presently, the pair is situated slightly above this active support level, as opposing forces of bearish and bullish activity continue to vie for dominance.
In order to anticipate the next directional move, traders must closely monitor the reaction of prices around current levels. It is crucial to consider two potential scenarios: a breakdown or a rejection higher.
If the technical support level of 1.3450 is breached, it would strengthen the bearish pressure and potentially lead to a decline towards 1.3330. Conversely, if the bulls are successful in defending the 1.3450 floor and initiate a bullish reversal, there could be resistance at 1.3510 initially, followed by 1.3700.