By Kenny Fisher
The Canadian dollar continues to struggle as USD/CAD has punched across the key 1.10 level in Wednesday trading. In economic news, the Bank of Canada held course with interest rate levels, maintaining the benchmark rate at an even 1.0%. It's another quiet day in the US, with no releases scheduled until Thursday. Meanwhile, the World Economic Forum has kicked off in Davos, Switzerland.
As expected, the Bank of Canada kept the benchmark interest rate pegged at 1.0%. The rate has not been adjusted since July 2010. The BOC noted in its policy statement that it was increasingly concerned about persistently low inflation, and sounded slightly more dovish in tone. However, in a press conference, BOC Governor Stephen Poloz took pains to emphasize that the Bank was neutral towards an interest rate adjustment. So it appears that the Bank is playing a wait-and see game, and will only make changes to interest rate levels if it is forced to respond to economic conditions, particularly inflation levels.
The World Economic Forum kicked off Wednesday in Davos, Switzerland. The prestigious event will see senior political officials, head of foreign banks and business people from dozens of countries meet and mingle. Traders should note that currency markets can be affected by statements issued at the forum, particularly those made by central bankers or other senior officials.
Weak inflation concerns are not restricted to Canada or Europe, as the US has also been plagued by persistently low inflation, an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten. Analysts will be watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.
USD/CAD for Wednesday, January 22, 2014
USD/CAD January 22 at 15:30 GMT
USD/CAD 1.1054 H: 1.1047 L: 1.0954
- USD/CAD has posted strong gains in Wednesday's North American session.
- The round number of 1.1000 is reverted to a support role. This is followed by a support level at 1.0906.
- 1.1094 is the next line of resistance. This line is under pressure as the Canadian dollar continues to lose ground. This is followed by resistance at 1.1177, which has remained intact since July 2009.
- Current range: 1.1000 to 1.1177
Further levels in both directions:
- Below: 1.1000, 1.0906, 1.0852, 1.0783 and 1.0652
- Above: 1.1094, 1.1177, 1.1319 and 1.1496
OANDA's Open Positions Ratio
USD/CAD ratio has reversed positions in Wednesday trading, pointing to gains in short positions. This is not reflected in the pair's current movement, as the Canadian dollar continues to lose ground. The ratio is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar reversing its downward movement.
USD/CAD has again pushed above the 1.10 level, as the Canadian dollar continues to lose ground. Early in the North American session, the US dollar has posted strong gains and continues to pressure the Canadian dollar.
- 15:00 Bank of Canada Monetary Policy Report
- 15:00 Bank of Canada Rate Statement
- 15:00 Bank of Canada Overnight Rate. Estimate 1.0%. Actual 1.0%.
- 16:15 Bank of Canada Press Conference
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.