A rate cut has been avoided this week at the Bank of Canada the market was increasingly pricing in before the start of the year. Hencewe saw a gigantic repositioning movement in spot FX during the event.
The BoC depicted a more optimistic medium-term outlook combined with ongoing financial support that will lower the demand for additional financial policy stimulus.
The Canadian dollar’s increase was attributed to high commodity costs (reflecting improving economic prospects) and a widely weaker US buck.
CAD net long positions went lower at the start of January but was holding in positive territory for the previous four weeks having bounced sharply in late December.
Meanwhile, the investors have been seeking out higher-yielding currencies this week since risk-on sentiment prevails and also a relief that a smooth transition in the White House enables investors to get on with business as normal.
With that said, a slew of better-than-expected US information has supported the greenback on Thursday after printing a fresh low from the DXY mid week.
Continued optimism about a massive stimulus package has spurred hopes of a comeback in the world’s largest economy.
USD/CAD technical analysis
The US dollar is setting a reduced on the euro’s rise place the European Central Bank on Thursday, however There’s a technical situation for the upside in the DXY as follows:
The monthly chart offers an upside corrective bias towards a 38.2% Fibonacci retracement and to test the previous lows.
Meanwhile, the USD/CAD has been coming a familiar support line/ pivot point across 1.2515.
