The USDCAD hiked rates by a greater than expected 100 basis points. The initial reaction was a run to the downside. The USDCAD moved from 1.30256 to a low of 1.2943, but has seen a snap back rally.
Looking at the hourly chart above, the price decline stalled the pair moved below the 50% midpoint of the range since June 28 at 1.29506. In the process, the price moved below the 100 and 200 hour moving averages at 1.2996 and 1.2975 respectively.
The subsequent move back to the upside took the price back between the two moving average levels. The current price is trading right around the 200 hour moving average 1.2975.
With the 100 basis point hike, and the stronger than expected US CPI data today, traders will wonder if the Bank of Canada influences the Fed to also increase rates by 100 basis point when they meet on July 27. Needless to say, the central banks are independent. However after the higher than expected US CPI, the market did start to price in the potential for 100 basis point in July. As a result, it may limit the move to the upside for the CAD (move lower in the USDCAD).
Of course, the bounce may also be that the market is anticipating a faster slowdown in the Canadian economy as result of the higher rates. Recall that the employment statistics on Friday were weaker than expectations in Canada.