Forex Investment and Currency Trading

So, after the dust has settled from this week’s focus on BoC policy, we are left with an overnight rate that the central bank has pre-committed to keep at 0.25% until the middle of next year (providing inflation behaves) and a framework for additional policy measures should they be needed. The read between the lines though is that the central bank perhaps doesn’t think these additional credit and quantitative easing (CE/QE) initiatives will be needed, if its latest growth estimates are on the money. The CAD was under a fair amount of pressure running into this week’s BoC policy announcement and MPR and, with CE/QE policies nowhere near being implemented – and with the USD tumbling broadly late in the week – traders continue to look for USD/CAD losses back below the 1.20 line. Near-term, look for gains to be capped in the low/mid 1.22s, with the 1.2330/50 area still serving a broader pivot level for the market. Short term support points are represented by the mid-April low at 1.1984. A clear push under the 1.20 line may be something of a game changer for the CAD in the medium term, with recent efforts to drill the CAD lower coming to nothing. We remain relatively positive on the CAD overall (there are some relative fundamental bright spots, such as smaller deficits here and significantly less credit stress, after all) and we continue to look for modest CAD gains versus the USD over the bulk of the year.