Loonie falls as the BOC leaves door open for a rate cut
The Canadian dollar weakened against the USD after the Bank of Japan delivered its interest rates decision. The central bank left rates unchanged at 1.75% as was widely expected. The bank also said that the door for an interest rate cut was wide open if the current economic slowdown persists. In a statement, governor Stephen Poloz said that the current state if the economy threatened to dampen inflation pressures. This negative outlook is a departure from recent communication by the central bank. Previously, officials were saying that the economy was more resilient in face of significant global uncertainty. The BOC was one of the few central banks to avoid cutting interest rates.
The Australian dollar rose sharply after the country released positive economic data. The country’s statistics office released the employment numbers for December. The unemployment rate dropped from 5.2% to 5.1% while the participation rate remained unchanged at 6.0%. The employment change came in at 28.9K, which was lower than November’s 39.9k, but was higher than the expected 15.0k. In addition, inflation expectations rose by 4.7%. These numbers are positive for the Australian economy, which has recently gone through a slowdown. Australia is also significantly affected because of the spreading coronavirus disease in China.
The euro was relatively unchanged during the American and Asian sessions as the markets wait for the European Central Bank decision. The bank will deliver its interest rates decision today. Analysts expect the ECB to leave rates unchanged. They also expect the central bank to commit itself to continuing the large-scale asset purchases that were started in November. Recent data from the European Union has shown some positive signs that the economy is improving.
The USD/CAD rose from yesterday’s intraday low of 1.3035 to a high of 1.3162. This price is above the important resistance level of 1.3100 and is also above the 14-day and 28-day exponential moving averages on the hourly chart. The price is between the 50% and 61.8% Fibonacci Retracement level on the four-hour chart. The moving average oscillator too has continued to soar. The pair may continue moving higher as the BOC turns dovish.
The EUR/USD pair was relatively unchanged as the market waited for the upcoming rates decision by the ECB. This price is along the 28-day and 14-day EMA. It is also between the 1.1070 and 1.1118 channel that has formed throughout the week. The pair, which is in consolidation, will likely see significant moves today ahead and after the ECB decision.
The AUD/USD pair rose sharply from an intraday low of 0.6825 to a high of 0.6877. This was the highest level since Tuesday this week. The price is above the 14-day and 28-day exponential moving averages. The RSI has moved from the oversold low of 30 to a high of 70. The same has happened with the stochastic oscillator. The pair may continue moving higher to test the resistance level of 0.6900.