Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

USD/CAD Quadruple Top Ahead Of BoC Rate Decision

By Kathy LienForexDec 08, 2021 02:53
ng.investing.com/analysis/usdcad-quadruple-top-ahead-of-boc-rate-decision-98815
USD/CAD Quadruple Top Ahead Of BoC Rate Decision
By Kathy Lien   |  Dec 08, 2021 02:53
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
There is a very clear quadruple top pattern in USD/CAD from 1.2850. Investors have been snapping up Canadian dollars ahead of Wednesday’s monetary policy announcement. The Bank of Canada is widely expected to leave interest rates unchanged, but given consistently positive data, it will reaffirm plans to raise interest rates early next year. When the BoC last met in October, it surprised the market by ending Quantitative Easing suddenly and advanced its forecast for a rate hike from the second half to the second quarter of 2022. Since then, the economy continues to recover from earlier restrictions. Job growth blew past estimates in November with more than 153,000 workers finding new employment. The labor market is not only back to pre-pandemic levels but the economy is at full employment. As indicated by today’s IVEY PMI report, manufacturing activity is up and most importantly, inflation is growing at its fastest pace since 2003.  
 
At this pace, the Bank of Canada can no longer justify the current level of policy accommodation. The market is pricing in anywhere between four to five rate hikes by the BoC next year. With the latest numbers, it would not be out of the question for the central bank to suggest that rates could be increased sooner – the RBNZ surprised with a quarter point hike in October. Omicron could hold the central bank back, but very early signs show that while fast moving, this variant may be less severe than other forms of the virus, which explains why stocks have recovered nearly all of its Omicron losses. If the Bank of Canada emphasizes the high level of inflation and brings forward tightening plans, USD/CAD could extend its slide down to 1.26. 
 
Monetary policy announcements can have a significant impact on currencies. The best performing currency today was the Australian dollar, which rose more than 0.8% after the Reserve Bank left monetary policy unchanged. According to RBA Governor Philip Lowe, “The emergence of the Omicron strain is a new source of uncertainty, but it is not expected to derail the recovery." The economy is expected to return to its pre-Delta path in the first half of 2022. By downplaying Omicron risk, the RBA has fuelled expectations for an earlier rate rise. Having sold off steadily since late October, this is the strongest two-day rally we’ve seen in AUD/USD in six weeks. The New Zealand dollar followed the Australian dollar higher. 
 
In contrast to the commodity currencies, the euro and sterling sold off against the U.S. dollar today. Although the German ZEW survey was not as weak as anticipated – the economic sentiment index dropped to 29.9 instead of 25.1, the current conditions component turned negative for the first time since June. With virus cases on the rise and Omicron spooking some nations back into lockdown, investors expect activity and sentiment to deteriorate further.    
USD/CAD Quadruple Top Ahead Of BoC Rate Decision
 

Related Articles

Kathy Lien
Dollar Gains Momentum In Early 2022 Trade By Kathy Lien - Jan 04, 2022

Dollar bulls came charging out of the gate on the first day of the 2022 trade. The greenback moved sharply higher against all of the major currencies, with USD/JPY closing in on a...

USD/CAD Quadruple Top Ahead Of BoC Rate Decision

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email