USD/CAD Analysis: Bank of Canada Cuts Interest Rate by 0.25%

This occurred yesterday and was in line with analysts' forecasts, according to a Bloomberg survey.

According to statements from the Bank of Canada:
→ Price growth indicators for consumer price index components have further decreased and are close to their historical average;
→ Recent data has increased confidence that inflation will continue moving towards the 2% target;
→ Monetary policy no longer needs to be as restrictive.

At the press conference, Governor Tiff Macklem stated that there is “compelling evidence” of weakening inflation and it is “reasonable to expect” further rate cuts if inflation continues to slow.

Technical analysis of the USD/CAD chart:
→ Since mid-April, the market has been in a downtrend (indicated by red lines);
→ Simultaneously, a longer-term uptrend is shown by the blue channel;
→ Overall, the price is being squeezed into a symmetrical triangle between the upper red and lower blue lines, with the axis around the 1.3671 level acting as a "magnet," indicating a stable balance of supply and demand. Yesterday’s news caused a spike in volatility, with the USD/CAD price attempting to break the upper boundary, but the breakout was false (indicated by an arrow), and the price returned to the axis where it was before the announcement.

Thus, it can be concluded that the market had anticipated the rate cut, and it was not a surprise. This means that fluctuations within the triangle may continue until a fundamental event occurs that can lead to a breakout of this consolidation pattern in technical analysis.

Analysts at Think.ING predict a possible decline in the USD/CAD rate to the 1.35 level in the second half of 2024.

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