Canadian Dollar: USD/CAD (CAD=X) Slides As Bank Of Canada “Sounds Alarm” And Coronavirus Prompts Oil Prices To Tumble 4%
The Canadian dollar exchange rates suffered a doubly whammy on Wednesday afternoon after contrary to many analyst expectations the Bank of Canada (BoC) statement was “extremely dovish”.
“In December they said inflation was “consistent with an economy operating near capacity;” this time they said it was “consistent with an economy that, until recently, has been operating close to capacity” (emphasis added)” says Marshall Gittler, BDSwiss. “That implies that maybe the economy currently isn’t operating close to capacity anymore, meaning that there could be some downward pressure on inflation. And the guidance was much more dovish: they said “In determining the future path for the Bank’s policy interest rate, Governing Council will be watching closely to see if the recent slowdown in growth is more persistent than forecast.” That implies they see the major risk being to the downside.”
“The Bank of Canada is obviously sounding the alarm, i.e. an interest rate cut in March should become increasingly probable” says Marc-André Fongern, MAF Global Forex “The central bank’s monetary policy may therefore have reached a significant turning point.”
“Markets have gone from pricing in almost nothing to a 25% chance of a BoC rate cut in March” says Viraj Patel.”50:50 BoC will cut at time of April MPR. If 1Q20 data disappoints as the Bank of Canada fully expects – then likely we’ll see a 25bps cut in Mar/Apr based on these comms.”
On top of the dovish Bank of Canada, the Canadian dollar suffered a slide in the price of oil.
“Adding insult to injury, oil prices plunged over 4% yesterday as worries about the impact of the Chinese coronavirus caused concerns about global growth” says Marshall Gittler, BDSwiss. “The result was a substantial repricing of the risk of a Bank of Canada rate cut and a plunge in the currency. We’ve seen several times over the last year how a Bank of Canada meeting can set off a sustained trend in USD/CAD that lasts until the next meeting (at least). This is likely to be one of those periods as well, in my view. While I disagree with their view and think that the global situation is actually improving, we’ll have to see that in the data before they change their mind. CAD bearish.”
The BoC left interest rates unchanged at 1.75% at their January 2020 meeting.
PRE BOC MEETING:
The Canadian Dollar (CAD) remained largely flat against a handful of currencies on Wednesday morning ahead of the upcoming Bank of Canada (BoC) interest rate decision.
The Canadian Dollar Pound (CAD/GBP) exchange rate was left flat ahead of this afternoon’s data, with the pairing trading at around £0.5850.
Today’s monetary policy meeting is likely to remain in focus for the ‘Loonie’, with the bank expected to leave rates unchanged in January.
While recent Canadian economic data has been mixed, BoC policymakers have not shown any signs of a near-term rate cut after leaving rates on hold last year while other banks slashed rates. It is likely Governor Stephen Poloz will continue to signal a wait-and-see approach during today’s meeting.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.32.
The projected lower bound is: 1.30.
The projected closing price is: 1.31.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 75.9494. This is not an overbought or oversold reading. The last signal was a buy 14 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.07. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 12 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 226.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 12 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 10 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.001 at 1.313. Volume was 21% below average (neutral) and Bollinger Bands were 25% narrower than normal.
Open High Low Close Volume___
1.313 1.317 1.312 1.313 45,303
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.31 1.31 1.32
Volatility: 4 5 5
Volume: 49,489 47,690 67,191
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX CAD= is currently 0.8% below its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect volume flowing into and out of CAD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 1 periods.