The USDCAD fell below its 100-hour moving average back on May 31. On that day, the price high stalled against the high from March 26 near 1.36539. Over the next 8 trading days, the price moved lower on 7 of those days. That took the price to a low on Friday at 1.3313. At that low, it tested the May 8 low at 1.33132. The full move up from the May low was retraced. The price bounced off that support level into the close (and closed at 1.33375).
In trading today, the price initially moved modestly higher in the Asian session before rotating back to the downside and retesting the floor level at 1.3313 once again. That floor level held support on 2 separate hourly bars today (see green number circles 3 and 4 on the chart above). Unable to move below that level, gave buyers a reason to push back to the upside (and sellers an opportunity to cover shorts).
The subsequent move higher has now pushed the price up to test the key falling 100-hour moving average at 1.33652 (blue line - the high price ticked up to 1.33698 so far). Buyers are making a play. However, they need to get and stay above the 100-hour moving average to make the play more convincing technically.
A break above would have traders looking toward the swing high from last Thursday at 1.3387. Move above that level and the 1.3400 area would be targeted followed by the falling 200-hour moving average currently at 1.34229. The price has not traded above that moving average since June 1.
Last week, the BOC raised rates by 25 basis points.
A key passage from the statement:
The Bank continues to expect CPI inflation to ease to around 3% in the summer, as lower energy prices feed through and last year’s large price gains fall out of the yearly data. However, with three-month measures of core inflation running in the 3½-4% range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the 2% target.
Adam pointed out last week, that it looks like a one-and-done hike with the final paragraph no longer saying the BOC "remains prepared to raise the policy rate further if needed to return inflation to the 2% target". Instead it said:
Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the inflation target. The Bank remains resolute in its commitment to restoring price stability for Canadians.
