The USD/CAD exchange rate went parabolic on Wednesday after the Bank of Canada (BoC) delivered its interest rate decision. The pair rose to a high of 1.3800, the highest level since March. Data by TradingView shows that the pair has surged by more than 5.2% from the lowest point this year.
Bank of Canada decisionThe biggest forex news for the day was the latest interest rate decision by the Bank of Canada. In a statement, the bank decided to leave rates unchanged at a multi-year high of 5% and also continued implementing its quantitative tightening policy.
The BoC believes that the Canadian economy is slowing, which has impacted its bond yields. It sees it growing by 2.9% this year and 2.3% in 2024. It also believes that inflation will remain between 4% and 5% for a while. The statement added:
“Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed.”
Analysts believe that the Bank of Canada will not deliver another rate hike this year. Instead, they expect that it will start cutting rates in 2024. Besides, key parts of the Canadian economy like delinquency rates and consumer spending shows that the situation is worsening.
The USD/CAD also rose after signs showed that the Fed could still hike rates again. Flash data by S&P Global showed that the country’s manufacturing and services PMIs rose above 50 in October. A PMI figure of 50 and above is a sign that a sector is expanding.
The Fed is worried that America’s inflation has gotten entrenched in the economy. The most recent data revealed that the headline consumer price index (CPI) dropped to 3.6% in September, higher than the Fed’s target of 2%.
USD/CAD technical analysis
The daily chart shows that the USD to CAD exchange rate continued rising after the BoC decision. It rose to a high of 1.3783, the highest point in months. It has remained above the 50-day and 100-day moving averages.
At the same time, the pair has moved above the first resistance of the Woodie pivot point. It is also approaching the important resistance level at 1.3862, the highest point on March 10th. The Relative Strength Index (RSI) and the Stochastic Oscillator have moved above the overbought level.
Therefore, the pair will continue rising as buyers target the key resistance at 1.3862. The flip side is that the pair has formed a rising wedge pattern, which is usually a bearish sign. If this happens, the level to watch will be at 1.3700.
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