Failing to back up his colleague, CAD bears closed out after Bank of Canada Governor Stephen Poloz gave his neutral stance.
Given the dovish remarks by BoC’s Deputy Governor Carolyn Wilkins earlier in the week, all Poloz had to do was vaguely back them and we’d have likely seen a much weaker Canadian dollar. Only he didn’t. Instead, he diverged from Wilkins and said that monetary policy as “about right." Naturally, this saw the Canadian dollar strengthen, which changes the picture over the near-term and could provide mean reversion for traders to capitalize on.
On a personal note, I suspect BoC will indeed shift towards a dovish narrative (or at least less neutral) over time, but yesterday was not the day. Therefore, the analysis is bullish on CAD over the near-term only, which can be reassessed as data unfolds.
EUR/CAD: Ahead of Poloz giving his talk, the cross was teasing a break above the October 2018 low. Yet, resistance held and the day closed with a bearish outside day at the highs. Given this also respected a rising resistance level and it tested the top of the upper Keltner channel, we suspect an interim top is in. Also note that we saw a six-day rally ahead of yesterday’s bearish outside day which also suggests prices need to at least retrace, if not reverse.
