CADCHF, D1
Most market participants now, anticipate the BOC to raise interest rates in today’s meeting, after being silent during the previous 2 meetings. GDP numbers for Q1 were much stronger than expected, raising prospects for another rate hike. However, will the BOC really raise interest rates or be more cautious and wait for more data to come in before taking action?
The April jobs report revealed that the unemployment rate held steady at 5.0%, just one spot above its lowest level in more than five decades, while inflation data for the month showed that headline inflation accelerated in April, despite all the metrics that basically slowed down. But, most importantly, the economy grew at twice the estimated pace during the first three months of the year, after stagnating at the end of 2022, resulting in the annual q/q rate skyrocketing to 3.1% from -0.1%.
That said, it’s also important to keep an eye on Canadian employment data for May, which is due for release on Friday, in addition to the BOC’s decision and the market’s subsequent response. A positive jobs report will persuade investors to increase their bets on a rate hike, adding an additional basis point value hike by the end of the year, even if policy makers decide to wait anyway, provided they leave the door open for another hike.
Technical Analysis
The cross registered an all-time low of 0.6476 last May, and since then the price has rebounded to the current level with a gain of over 4%. The closest resistance is seen at 0.6810 with a continuation of the 200 EMA which will be a dynamic resistance. The pair seems to have formed an inverted H&S with the respective lows at 0.6594/0.6476/0.6618. The RSI is not yet overbought and at 62.06 is still rising, validation of the rebound is seen from the MACD signal line and histogram which have crossed crossed into the buy area above the 0 line. Movement above 0.6932 could be a starting point for changing the medium-term trend, but as long as this level holds, a number of consolidations are still likely to be seen in trading going forward.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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