The Bank of Canada (BoC) has just announced its interest rate decision, leaving the key rate unchanged at 0.25% at the April policy meeting. However, the key data piece was the tapering of the quantitative easing program of the bank via a downward adjustment of the size of its asset purchases from C$ 4billion to C$3billion.
In a hawkish outlook, the BoC also noted that economic conditions could allow for a potential rate hike in the lower half of 2022. Following this hawkish stance by the bank, the USD/CAD came under heavy selling pressure and shed off 0.86%, erasing all earlier gains.
Technical Levels to Watch
The BoC decision has caused the USD/CAD to lose all its earlier gains for the day. As predicted in the preview of this decision last week, the tapering of the QE program by the Bank of Canada has had a positive effect on the Loonie, despite a weakening of crude oil prices.
Today’s steep decline has allowed the channel to maintain the integrity of the upper border, following the rejection from the 1.26219 resistance. This decline is now challenging the 1.25323 support. A 3% penetration close below this level allows bears to aim for 1.24790, with 1.24489 and 1.23998 serving as additional downside targets.
On the other hand, bulls on the USD/CAD can only wait for the break of the channel’s upper border and the 1.26219 resistance, to provide a clear path towards an upside reversal of the trend, targeting 1.26647 and 1.27315 along the way.