Yesterday saw a strong move higher in the Canadian dollar after Bank of Canada Senior Deputy Governor Wilkins said the economy was showing some encouraging signs. In a surprisingly hawkish speech Hawkins also stated that the central bank will assess whether all the stimulus in place is "needed".
Governor Poloz has this afternoon done his part to support Cad in talking up the economy and also stating that interest rates have been extraordinarily low to offset shocks. Further comments from Poloz include "interest rate cuts have done their job" and "it’s no time to throw a party over the recovery". The standout remark here is the statement that rates have been "extraordinarily" low, which could be seen as pretty Hawkish.
The Canadian dollar has seen two strong moves higher (USDCAD lower) in the past 24 hours following hawkish comments from BOC members
A look at the longer term picture reveals that recent sessions have seen some important developments. Price is now testing the lower bound of a rising trend channel from the lows seen in March last year. This rising trendline comes in roughly at 1.3240 and the confluence of this and the previous swing low increase its importance as possible support. A close below this level could signal a major breakout and reflect a long term trend change for this market.
USDCAD is now testing potentially major support around 1.3240. The confluence of a rising trendline from the 2016 low and the prior swing low add to the importance of this level. Tonight’s close could be key.
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