By Ketki Saxena
Investing.com -- The Canadian dollar traded little changed against its U.S. counterpart on Wednesday, staying near a five-month low as the Bank of Canada left rates on hold - a move that had been almost fully priced into markets prior to today's announcement from the Canadian central bank.
The BoC held its key interest rate at 5%, noting weakening in the domestic economy and a cooling labour market, but reiterated that it remains prepared to hike rates further if needed.
However, economists are now leaning to the consensus that the Bank of Canada has reached its terminal rate and is done hiking.
Analysts at ING note, "The CAD OIS curve after the meeting shows markets are pricing in around 10bp of tightening by the BoC, meaning that if we are right and the Bank does not hike rates again, the repricing lower in Canadian rate expectations should not materially hit the loonie."
"USD/CAD has plenty of room to correct on the back of rate-gap and commodity dynamics, but solid US activity data is likely to keep the pair supported in the near term."
The latest indicator of that "solid US activity data" was the U.S. services sector, with data from the Institute for Supply Management showing that non-manufacturing PMI rose to its highest level since February.
The data raised bets for further tightening from the US Federal Reserve, supporting the greenback and helping it add to its recent gains.
On a technical level for the pair, analysts at Daily Forex note, "USD/CAD continued its upward trajectory, marking the fourth consecutive day of gains on Wednesday, but it encountered resistance in the 1.3665 region, struggling to push past it decisively...Moving higher, the next critical ceiling is located at 1.3850, near the 2023 peak."
"On the flip side, if USD/CAD gets rejected from current levels and shifts downward, the first technical support to keep an eye on rests at 1.3540, followed by 1.3500. Further down the line, the next relevant floor is situated in the vicinity of the 200-day simple moving average."