On rates, while they “may be relatively low now,” she added the bank “still has room to maneuver” and that “lowering rates could provide some insurance against downside to inflation.” Moreover, she said that the central bank has additional options in their tool kit, such as “extraordinary forward guidance and large-scale asset purchases.”
With CPI data later today and Poloz due to speak tomorrow, we could see a further follow-through with CAD weakness should inflation disappoint and Poloz add his dovish remarks. There are also retail sales, GDP, and PPI data ahead of their next meeting on the 4th of December.
CPI: BOC year over year inflation data sits around the center band of their 1-3% target, with standard CPI YoY at 1.9%, trimmed mean at 2.1%, and weighted median at 2.2%. Every month, however, CPI has contracted three times over the last four prints, with September’s read at -0.15% below -1 standard deviations. Eventually, these monthly figures will weigh on the slowly moving yearly reads, so another negative print would see a rise in expectations for BOC to cut in December or February. Furthermore, if oil prices are to weaken, it could further weigh on the Canadian dollar and, eventually, inflation.
NZD/CAD was the biggest gainer of the US session, breaking key resistance at 0.8500 and closing above March trendline to a 12-week high. Given that NZD traders remain heavily short, data is improving, and TWI remains well below RBNZ’s forecast, we continue to see upside potential for NZD crosses. CAD could be the ideal currency to pair it with if BOC extends their dovish rhetoric, and data weakens.
- A bullish engulfing candle closed firmly above key resistance and the bearish channel.
- The 50 and 100-day eMA’s could provide support around the low of the engulfing candle or 0.8500 support.
- While 0.8500 may hold as support for near-term bullish opportunities, and bulls could consider seeking dips above the 0.8430 low.
- The near-term target is around 0.8600, near swing high/low, and the 200-day EMA.
AUD/CAD also shows potential for a deeper correction, if not a reversal against its bearish trend. Declines slatted around the July 2010 low, and a bullish piercing pattern confirmed a bear-trap with a false break of support. Having rebound to 0.9100, prices have pulled back, and yesterday’s bullish engulfing candle raises the potential for a higher low to form. Moreover, it could be part of an inverted head and shoulders pattern.
- The near-term bias remains bullish above yesterday’s low (0.8967) and for a re-test of the 0.9144 high.
- A break above 0.9144 confirms an inverted head and shoulders pattern which, if successful, projects a target around the 0.9456
- Failure of 0.9144 to break suggests the cross is to remain in a choppy sideways range, where bears could seek shorts at the highs and bulls seek dips lower down I the rage.
Related Analysis:
USD/CAD Still in Apex
Whether It Breaks Or Reverts To This Year’s Trend, 0.8500 Is Key For NZD/CAD
GBP/CAD breaks out ahead of a busy week for Loonie
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