BoC rate hike expectations support Canadian dollar rally. The pair broke below 1.29 support line. What could we expect for the week ahead? Analysis by AtoZForex approved Forex Broker iTrader
09 September, iTrader - The Canadian dollar had a dazzling performance on the previous week as the Canadian currency retained its strength against its US counterpart. Thanks to the surprise switch of the Bank of Canada’s stance on interest rate hike expectations, Canadian dollar rally paved the way for its best finish in nine months.
The Canadian dollar, also known as the loonie in the Forex market, gained further ground against the U.S. dollar breaking below 1.29 benchmark.
USDCAD has its strong support line at 1.2730 level. While, rate hike expectations is the biggest Canadian dollar rally supporter, the crude oil prices did not contribute enough.
BoC rate hike expectations support Canadian dollar rally
Previously, the BoC’s Governor Stephen Poloz surprisingly switched to a hawkish stance as he gave a hint that the Bank of Canada may pull off an interest rate hike sooner rather than later. Investors believed that the central bank had finally realized that the economy was in a good state to support the hike. This in short paved the way for the common market phenomena:
"Buy the rumor sell the facts!"
Canada’s economy expanded by 0.2% and 0.5% in March and April respectively based on the data released by the Statistics Canada. Now, BoC's rate hike expectations attract more attention to the Canadian economy.
While the U.S. dollar went on a limbo, BoC rate hike expectations supported Canadian dollar rally, strongest Canadian Dollar since September 2016. Meanwhile, USDCAD breakout supports further bearish rally.
USDCAD weekly forecast
1.2930 was a strong USDCAD support line. Since the pair broke below this level the following two support lines follow as 1.2730 and 1.2555.
There is a possibility that USDCAD will try to test 1.2930 resistance line during the course of the week. Since, BoC rate hike expectations support Canadian dollar rally, we could expect to sell the highs for the pair. Alternatively, a break above 1.2930 could follow with highs towards 1.30 psychological resistance line.
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