USD/CAD drops to lowest in two weeks near 1.3200 after BoC
- Loonie rises across the board after the Bank of Canada meeting.
- USD/CAD breaks a two-week range, points to further losses.
The USD/CAD dropped from 1.3275 to 1.3218, reaching the lowest level since November 19, following the release of the Bank of Canada (BoC) statement. The central bank, as expected, kept rates unchanged, offering an upbeat tone that boosted the loonie. The greenback remains weak after lower than expected economic numbers from the US job market and the service sector.
CAD higher supported by the BoC
The BoC left the overnight interest rate unchanged at 1.75%. In the statement presented overall, an optimistic view on the local economy. Also mentioned the global economy is showing signs of stabilization.
“The statement’s the key driver of the price action, underscoring a more upbeat tone. That contrasts with the prior statement, which has helped to nudge USD/CAD lower. It’s more cold water for a January cut, though clearly not a game-changer for CAD. Recall, CAD positioning is one of the most one-sided in the G10; that means that while markets have scaled back long exposure over the past month, there’s little reason to reengage on the long side”, explained analysts at TD Securities.
The pair dropped quickly to 1.3218 and then rebounded. As of writing trades at 1.3230/35, down 55 pips, having the worst day in over a month. From a technical perspective, the bias now points to the downside. The pair dropped back below the 20-day moving average for the first time since early November and broke the two-week trading range 1.3325/1.3260. On the downside, the next strong support is located around 1.3200 and then 1.3180.
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