The USDCAD is trading lower as the Bank of Canada has not only left interest rates unchanged at 0.25%, but it has doubled down on its QE program and has also left negative interest rates off its plate. As I wrote yesterday in my preview of the BoC interest rate decision, consideration of negative interest rates would have been bearish for the CAD. However, this is off the table, and the final statement by outgoing Governor Poloz instead contains some hawkish comments as displayed below:
“Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy, but this impact appears to have peaked.”
“The Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report”.
“BOC expects the economy to resume growth in the third quarter…”
“BOC maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway”.
The hawkish nature of the BoC statement seems to have been offset by the better-than-expected ISM Non-Manufacturing PMI number out of the US, which saw an increase of 45.4 versus last month’s 41.8 and also better than the consensus number of 44.2.
The USDCAD has thinned out into doji candle on the daily chart and therefore remains short of closing the March 9 upside gap.
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Technical Outlook for USDCAD
Reports that have just hit the news wires suggest that the Saudis have requested a postponement of the online summit of the OPEC + alliance until mid-June 2020. This announcement seems to have stalled progress on crude oil prices, and by extension the strength of the USDCAD. Crude oil is presently lower by -0.46%, and this correlates with the stall seen on the USDCAD on the daily chart.
Failure to sustain the breakdown of the 1.35499 could allow the USDCAD to stage an upside recovery, which targets 1.36961 in the first instance and 1.37629 subsequently if the pullback continues.
On the flip side, a rejection at 1.35499 allows the pair to make another attempt at closing the gap. This move places 1.34656 in its crosshairs. 1.33821 and 1.33487 remain the nearest downside targets after 1.34656.
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