Last week, the Bank of Canada raised the interest rate by 50.0 basis points to 4.25%, which, however, led to the weakening of the national currency in the USD/CAD pair to 1.3670. In an accompanying statement, the regulator noted that the pace of economic recovery is lagging behind forecast, and inflation remains high, amounting to about 7.0% — the highest in the last 40 years. Experts believe that now the agency will pause in tightening monetary policy.
Nevertheless, analysts call the fall in oil prices – Canada's main export item – the main driver of negative dynamics in the asset. Last week, WTI Crude Oil quotes immediately lost 10.7% after the EU embargo on Russian "black gold" came into force, which is why sellers of the Canadian dollar gained an advantage, and the USD/CAD pair aimed to break out the resistance level of 1.3670.
In turn, the USD is supported by the "hawkish" attitude of the US Fed. During his last speech, the head of the regulator Jerome Powell made it clear to market participants that at the final meeting of this year, which will be held on December 14, the interest rate will be adjusted again in the direction of growth, but its value may be significantly lower than the already familiar 75.0 basis points. If the forecast is justified, the USD may continue the upward trend that began last week.
Investors will also pay attention to the speech of Tiff Macklem, the head of the Bank of Canada, which is scheduled for today at 22:25 (GMT+2). The absence of a hint of tightening monetary policy will give buyers of the USD/CAD pair chances to update the November high of 1.3800.
The long-term trend remains downward, but market participants are trying to break the key resistance in the area of 1.3670. If this level is held, the fall will continue with a target of 1.3475. Otherwise, the trend will reverse upwards, and the target for purchases will be the November maximum of 1.3800.
The mid-term trend is upward. Last week, market participants tested the key support of the 1.3393–1.3370 trend, as a result of which the price rose and updated the maximum on November 29. Now the new growth target is the 1.3751–1.3727 zone. The key trend support is shifting to the levels of 1.3445–1.3422, and in case of correction to this area, it will be possible to consider new long positions.
Resistance levels: 1.3670, 1.3800, 1.3960. | Support levels: 1.3475, 1.3250.