CAD Canadian dollar - Canada hawks raise interest rates, Canadian dollar rebounds strongly

This week, the Bank of Canada and the Reserve Bank of Australia also maintained the pace of hawkish interest rate hikes, making both the Canadian dollar and the Australian dollar stronger. The Bank of Canada raised its overnight interest rate to a 22-year high of 4.75% on Wednesday. The Bank of Canada has been on hold since January to assess the impact of previous rate hikes. Since March 2022, the central bank has raised interest rates eight times to a 15-year high of 4.50%, the fastest round of policy tightening cycle in the bank's history. After the decision, markets and analysts predicted that the central bank would raise interest rates again next month in a bid to rein in an overheating economy and stubbornly high inflation. The Reserve Bank of Australia raised interest rates for the second time in a row on Tuesday, after skipping a rate hike in April; RBA Governor Lowe further warned on Wednesday that further interest rate hikes are possible in the future to ease rising price pressures, even if the economy declines sharply increased risk. The next focus will be on the Federal Reserve’s interest rate meeting next Wednesday, and the market generally expects to keep interest rates unchanged; but before the Fed’s decision, inflation data for May will be released on Tuesday, and the U.S. April Consumer Price Index (CPI) is expected The year-on-year increase fell to 4.9%; if the data is significantly different from expectations, be careful that this may affect the Fed's decision.

USD/CAD briefly hit a four-week low of 1.3319 after Canada raised interest rates. Money markets see a more than 60 percent chance of another rate hike in July and have fully priced in further policy tightening by September. The exchange rate hit a high of 1.3667 on April 28, and just reached a high of 1.3654 on May 26. After that, the dollar fell back step by step. There is a chance that the technical double top will delay the adjustment situation. The current key is expected to be the 250-day moving average. The lows of the exchange rate in the past two months have also found support on this indicator. It is currently at the level of 1.3380. The next key point is to pay attention to the low of 1.3260 this year. If the market outlook falls below this area, the USD/CAD Yuan will turn weak. It is expected to extend the support to 1.3130 to 1.30 mark, further pointing to the 1.28 level. As for the upper resistance, it is estimated that the 1.37 level has not been broken twice in the near future, and the next level is expected to be 1.38 level.

This week's news:
Bank of Canada raises interest rate to 4.75%, highest in 22 years
Central bank expresses growing concern that CPI may remain well above 2% target

Focus:
Friday: Canadian employment data for May (20:30)

Estimated volatility:
Resistance 1.3700 – 1.3800
Support 1.3380 - 1.3260* - 1.3130

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