By Ketki Saxena
Investing.com – The Canadian dollar strengthened against its US counterpart today, supported by risk-on sentiment, a rally in crude prices, and robust economic data. A speech by Bank of Canada governor Tiff Macklem had little impact on the loonie, with much of the messaging a reiteration of the Bank’s rhetoric at its policy meeting in January.
The Bank of Canada governor reaffirmed that rates hakes are on a “conditional pause” as inflation eases, though more hikes may be on the cards depending on the data.
Meanwhile, the US dollar retreated following a speech from Jerome Powell that also reiterated messaging from the Fed’s monetary policy announcement in early Fed (despite a blockbuster jobs report on Friday that had amped up bets for a hawkish pivot from the central bank.
Powell confirmed once again that the disinflationary process has begun to take place, and that further interest rate hikes are on the table.
While commentary from both Powell and Macklem added little to what had previously been announced at the policy announcements, the main driver for the broad based USD retreat was due to the fact that Powell was not more hawkish - a factor that investors had been betting on subsequent to Friday’s blockbuster US jobs report.
Treasury yields declined following the announcement, and sentiment turning more decidedly risk on, as reflected in equities.
The Canadian dollar meanwhile was further boosted by gains in crude price, which continue to be supported by the prospect of the Chinese reopening, hopes for a less hawkish Fed, and more recently, due to supply disruptions following the earthquakes in Turkey.
On a technical level, analysts at Forex.com note, “With little in the way of new information from Macklem, USD/CAD is trading essentially unchanged on the week near 1.3400. Zooming out, the pair remains above its November lows but below its October (and December) highs, signaling consolidative price action.”
“In the short term, traders are watching the 50-day EMA near 1.3450 as resistance, followed by the declining “trend” line near 1.3550, while support sits at the 200-day EMA around 1.3260 and previous-resistance-turned-support at the 1.3200 handle.”