USD/CAD hits a one-month low under 1.3500, loonie recovers from the dovish BoC hike
- Bank of Canada delivered a rate hike below expectations on Wednesday.
- Loonie resurges after yesterday’s slide.
- USD/CAD testing critical support around 1.3500.
The USD/CAD dropped more than a hundred pips from the daily high at 1.3625 and currently is testing the critical support area around 1.3500. The loonie is among the top performers on Thursday. It bottomed at 1.3489, the lowest level since October 23.
A firm break under 1.3500 would leave USD/CAD vulnerable to an extension of the downside, with not much support area until 1.3400. If the pair remains above, the dollar could recover ground but only above 1.3640/50, the outlook would improve for the greenback.
After BoC, focus on data
On Wednesday, the Bank of Canada raised the key interest rate by 50 bps, surprising market participants that expected a 75 bps. The loonie lost ground across the board after the dovish rate hike. Although, on Thursday it is recovering, supported by risk appetite and higher crude oil prices. On Friday, the August GDP report is due.
In the US, ahead of the FOMC decision on November 2, GDP data released on Thursday showed the economy expanded at an annualized rate of 2.6% during the third quarter, above 2.4% of market consensus while the GDP Price Index dropped from 9.1% to 4.1%. A different report showed Durable Goods Orders increased by 0.4% in September according to preliminary data. Initial Jobless Claims rose to 217K while Continuing Claims jumped to 1.438M, the highest in months.
The greenback lost momentum after the numbers and trimmed gains across the board. The DXY is up by 0.55%, recovering just half of Wednesday’s losses. The move higher looks vulnerable as US yields are at fresh weekly lows and equity prices rise.
Technical levels