USDCAD retreated from its monthly highs ahead of Bank of Canada (BOC) Governor Stephen Poloz’ speech. Earlier today, the central bank chief made an appearance at the Federal Reserve Bank of San Francisco.
The currency pair dropped around 30 pips from its daily open price at 1.3246 when the speech was released at 2:45 am GMT. The document titled, “Technological Progress and Monetary Policy: Managing the Fourth Industrial Revolution,” discussed the effect of technology on monetary policy. It outlined how new technologies make it difficult for policymakers to manage monetary policy in an already-uncertain age but has the potential to boost economic growth.
The Loonie gained ground at the wake of the paper’s release because it lacked any hints that the central bank would further ease their own monetary policy. In fact, in his speech, he even sounded optimistic when he said that wage growth in Canada was solid. Remember that the currency sold off during the last BOC statement. The central bank had kept rates steady at 0.75% but BOC Governor Stephen Poloz surprised the markets with his dovish tone. He focused on the risks posed by the ongoing trade war to the domestic economy which was a departure from the optimistic tone of his last two statements.
The commodity currency also benefited from the pick-up in risk appetite in today’s Asian session.There was news that the People’s Bank of China (PBoC) injected around 200 billion yuan into the economy in an effort to stimulate growth. This was bullish for risk currencies as it would mean that stronger Chinese growth could translate to a stronger global economy.
On the hourly time frame, USDCAD broke support at the 100 SMA and its lows for November 13. It’s currently trading around 1.3235 where it made lows on November 12. The next level that sellers would need to clear is at 1.3210 which marks this week’s lows and the 200 SMA.
Alternatively, if the dollar regains its strength in today’s trading, we could see USDCAD test or even make new monthly highs beyond 1.3269.
Download our latest quarterly market outlook for our longer-term trade ideas.