USD/CAD reaches new six-year high on BOC rate cut, Yellen comments
James Chen July 15, 2015 10:16 PM
<p>USD/CAD (daily chart shown below) shot up to a new six-year high above 1.29 on Wednesday after the Bank of Canada (BOC) slashed its benchmark […]</p>
USD/CAD (daily chart shown below) shot up to a new six-year high above 1.29 on Wednesday after the Bank of Canada (BOC) slashed its benchmark interest rate for the second time this year. The rate was lowered to 0.5%. This resulted in a plunge for the Canadian dollar, which had already been weakened by falling oil prices.
Additionally, US Federal Reserve Chair Janet Yellen reiterated on Wednesday the Fed’s intention to raise interest rates this year, provided the US economy evolves as expected. This comment helped pushed the US dollar higher after the greenback had already been lifted earlier in the day by a better-than-expected Producer Price Index (PPI) that saw a 0.4% increase versus expectations of 0.2%.
This combination of factors propping up the US dollar and pressuring the Canadian dollar resulted in the USD/CAD currency pair rising dramatically above its previous multi-year highs around the key 1.2800 resistance level.
For the past month, USD/CAD has been rising sharply from its last downswing in mid-June that turned back to the upside just above its 200-day moving average and a key uptrend line that has been in place for the past year. That turn was accented by a clear bullish hammer candle. Since then, the currency pair has climbed virtually unremittingly on a strengthening US dollar and dropping oil prices.
While a pullback after Wednesday’s over-extension should soon be due, the immediate upside target within the context of USD/CAD’s strong bullish run remains at the 1.3000 psychological resistance level, last reached in March of 2009.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.