We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy.
In this installment George recaps the March Bank of Canada interest rate decision where the BoC kept rates on hold at 5% while maintaining their message that policy settings are restrictive enough to get inflation back down to their 2% target. With growth running below potential and some signs of slowing in wage growth, the BoC remains cautious and is in no hurry to cut interest rates. RBC Economics expects 100 basis points in cuts this year, taking the overnight rate to 4% with the first rate cut taking place in June.
Further, near-term risks are tilted toward the BoC cutting rates later rather than sooner. Broad-based USD direction remains the primary driver of USDCAD. The recent bearish trend reversal ended the uptrend in place since late December exposing support at 1.3413 and 1.3343. Thus, the expected trading range for this month is slightly lower at 1.3200 to 1.3700. USD sellers should look towards the 1.3600/1.3700 area while over the near-term, the 1.3200/1.3300 area should provide an opportunity for USD buyers.