The Canadian dollar seen massive selling after the Bank of Canada (BoC) Governor Stephen Poloz kept the benchmark rate level at one percent. The BoC growth forecasts did increase from 2.3 percent to 2.5 percent, but Poloz indicated that inflation would remain below the two percent target.
“The strengthening of the global economy and recent depreciation of the Canadian dollar should foster a broadening of the composition of growth,” said the BoC Governor. However, exports continue to disappoint. Exports had done better in 2013, contributing 1.2 percent to Canada’s growth expansion, than 2012; yet, policy makers still see weakness as the currency has taken a hit. “As yet there are no signs of a re-balancing towards exports and business investment,” said policy makers.
There is no give in the USDCAD. Up over 158 pips, currently at 1.1131, the US dollar has out-shined its neighbor currency for sometime. The direction of the pair was not shocking, but the way it has traded up has been too quick to explain. Gaining 525 pips in three sessions, one would think it was pegged to the yen.
In USDCAD outlook on December 12, the initiated target of 1.0800 has been blown through. The weekly chart is overextended with an RSI nearing 75, but the trend strength remains high at 27. The +DMI is reaching to 35, but with a move like today the pair will pullback. The weekly price action support is located at 1.0975, while a residual bump forward to 1.1180 is probable. Going forward, with all things considered equal, the pair should continue moving upward over the next few months.