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USDCAD At 5-Week Lows On Oil/Hawkish BOC, Cross/JPY Strongly Supported

FOREX
  • The Bank of Canada initiated lift-off today by raising the overnight rate by 25bps to 0.5%. While CAD strength had largely been as a result of the prior significant surge in crude futures, a hawkish tilt to the statement provided an additional tailwind for the Canadian dollar, prompting USDCAD (-0.75%) to plumb fresh 5-week lows.
  • After briefly testing the key short-term support of 1.2636 (Feb 10 low) that forms the bottom of the post Jan26 BOC/FOMC range, a sustained clearance should open 1.2560 (Jan 26 low).
  • The 2% bounce in equity indices and oil price advance of around 8% on Wednesday also lent support to the likes of AUD, NZD and GBP while historical safe havens CHF (-0.26%) and JPY (-0.55%) were weighed upon.
  • The divergence in G10 majors was evident with Cross/JPY being extremely well supported throughout the trading day as CAD/JPY rallied over 1.25%.
  • EURUSD trades unchanged for the session, however, the single currency experienced some strong volatility after extending yesterday’s downward momentum to trade at 1.1058 amid fresh highs in the dollar index above 97.80. However, as equity markets bounced, EURUSD rose back above the 1.11 mark, looking likely to close just below session highs of 1.1143.
  • Thursday will see the ECB Monetary Policy Meeting Accounts, as well as euro area unemployment, German car production and sales, and final services PMI data. BOC Governor, Tiff Macklem is then due to hold an online press conference about the Economic Progress Report with a Q&A scheduled.
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