CAD  – USD/CAD breaks through the top of its recent month-long range

The Bank of Canada (BoC) held its key policy rate steady at 2.75% for the third consecutive quarter on Wednesday, in line with expectations, and stated that the risk of a serious escalation in the global trade war has diminished. However, the central bank declined to provide detailed forecasts for the Canadian economy for the second consecutive quarter, citing uncertainty surrounding U.S. trade policy. The BoC also indicated that it could cut interest rates if the economy weakens further, but only if upward inflationary pressures remain contained. Money markets are pricing in a greater than 81% probability that the BoC will hold interest rates steady again in September and believe there will be no further rate cuts this year.

The USD/CAD pair fell before recovering last week, stalling at a June low of 1.3537. It then retreated to around 1.37, breaking above the June 23 high of 1.3798 and the July 17 high of 1.3774 on Wednesday, potentially signaling the start of a new, extended rally. Based on the cumulative decline since May, a 50% rebound would reach 1.3775, while a 61.8% rebound would reach 1.3835. Furthermore, the 250-day moving average of 1.3960 and the 1.40 level remain crucial support levels. The support is expected at 1.3750 and 1.3680, with a higher support level at 1.35. Subsequently, focus is on the low of 1.3418, last September's low.

Forecast range:
Resistance: 1.3775 - 1.3835 – 1.3960 – 1.4000
Support: 1.3750 – 1.3680 – 1.3500 – 1.3418

This Week's News:
July 30
The Bank of Canada maintained interest rates at 2.75%.
The Bank of Canada stated that the rate was maintained because the Canadian economy has shown resilience so far and underlying inflationary pressures persist.

Focus:
Thursday
Canada's May GDP (8:30 PM)

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