USD/CAD: Positive BoC to cap rallies, further losses below 1.2450 – OCBC

The CAD recovered from Tuesday’s underperformance as the Bank of Canada came in more positive than expected. Terence Wu, FX Strategist at OCBC Bank, notes that further downside in the immediate term will require a clean break of the 1.2450 support.

See: USD/CAD to nosedive below the 1.20 mark by year-end – ING

Continue to favour the CAD space in the medium-term

“The USD/CAD outperformed, with the BoC first out of the gates in terms of tapering asset purchases. In a positive statement overall, the guidance on inflation and output gap seemed to imply that rate hikes may be on the table by late-2022 – perhaps earlier than what the market expected the BoC to communicate and ahead of other major central banks.”

“Expect the BoC’s stance to place a cap above the USD/CAD going forward.”

“The 1.2450/00 support zone is again into play for the USD/CAD. Any further breach would leave the pair targeting the 1.2370/00 March lows.”