The USD/CAD pair traded in a narrow range Wednesday, failing to move notably following the latest Bank of Canada monetary policy decision.
Bank of Canada disappoints CAD bulls
As widely expected, the Canadian central bank left monetary policy unchanged, and the primary was kept at 0.25%.
In the following statement, the central bank forecasts CPI inflation to remain elevated in the first half of 2022, but it would likely moderate by the second half, toward the 2% level .
Regarding the economic outlook, the Bank of Canada stated that the economy had “considerable momentum” into the Q4, including the improvement in the labor market , which brought the employment rate back to its pre-pandemic level.
However, floods in British Columbia and uncertainty from the omicron variant “could weigh on growth by compounding supply chain disruptions, cutting demand for some services.”
The BoC also commented that “given ongoing excess capacity,” the Canadian economy would continue to require monetary policy support and emphasized that they are “committed to holding the rate” until economic slack is absorbed. According to the BoC October projection, that will happen sometime in the middle of 2022.
The USD/CAD pair’s reaction was muted, and it spiked circa 30 pips after the decision, pushing the pair back above 1.2650.
On the US data front, the JOLTS Job Openings indicator was released, rising to 11.03 million in October, up from 10.44 million in September, but causing no volatility in the markets.
Technically speaking, the pair seems to be topping
The Canadian dollar strengthened this week, supported by the recovery in “risky” assets following the recent plunge. Additionally, the CAD received some support from the rising oil prices as the WTI benchmark managed to rise back above its 200-day moving average at 70 USD, confirming the medium-term uptrend.
The Loonie could rise further as the MACD indicator sent a bearish signal on the USD/CAD daily chart, implying a possible decline in the pair. The short-term support could be found at 1.26, while the next target below that support should be at 1.25, where the 200-day moving average is.
It also looks like a multiple top pattern above 1.28, with a potential to send the pair notably lower, just like it has done several times already .
Alternatively, if bulls reappear, the initial resistance might be in the 1.2720 zone, followed by the current swing highs in the 1.28 area.