Canadian dollar is the strongest currency today and extends its strength after an upbeat statement from BoC. Bank of Canada left rates unchanged at 0.25% as widely expected and reiterated the conditional commitment to be on hold until end of Q2. NEvertheless, the bank did acknowledged that level of economic activity in Canada has been slightly higher than the Bank had projected in the latest MPR. Also core inflation has been slightly firmer than projected too. USD/CAD dived through 1.0369 support earlier today and is set to take on 1.0205/0223 support zone.
Dollar attempted to break out from recent range against Euro earlier today but failed to sustain above 1.3443 level and retreated sharply. More consolidation is still expected in near term and the attempt to resume recent rise would be limited by strength in commodities as well as commodity currencies. Crude oil is still holding around 78/80 level while gold is also holding on to 1120 level.
RBA restarted the tightening cycle today by raising key interest rate by 25bps to 4.00%. In the accompanying statement, Governor Stevens said that today's decision is a further step in the process of bringing interest rate closer to average. The bank expects growth to be close to trend and inflation close to target over the coming year. AUD/USD gathers some momentum in early US session and is heading to have a test on 0.9070 resistance.
On the data front, Japan unemployment rate dropped from 5.2% to 4.9% in January. Household spending rose less than expected by 1.7% yoy in January. Australian retail sales grew more than expected by 1.2% mom in January. Swiss GDP grew 0.7% qoq, 0.6% yoy in Q4. UK PMI construction dropped slightly to 48.5 in February. Eurozone flash CPI came in at 0.9% yoy in February. PPI rose 0.7% mom, dropped -1.0% yoy in January.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.0357; (P) 1.0465; (R1) 1.0521; More.
USD/CAD's fall from 1.0679 extends further to as low as 1.0308 in early US session. The break of 1.0369 support confirms that whole decline from 1.0779 has resumed. Further decline should now be seen towards 1.0205/0223 support zone. Nevertheless, as the current decline is treated as part of the consolidation pattern that started at 1.0205, we'd expect some strong support at 1.0205/0223 support zone to bring rebound. On the upside, above 1.0407 minor resistance will turn intraday bias neutral first.
In the bigger picture, we're still favoring the case that whole medium term fall from 1.3063, which is viewed as a correction to long term rise from 0.9056, has completed at 1.0205 already. But a break of 1.0851 resistance is needed to confirm this case. In such case stronger rally should be seen to 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, however, break of 1.0205 low will invalidate this view and target parity instead.