Bank of America: BoC On Hold With A Hawkish Message On Wed

Bank of America Global Research discusses its expectations for tomorrow’s BoC policy decision.

“We expect the Bank of Canada (BoC) to remain on pause with the overnight rate at 4.50% on 12 April. Inflation remains high, but both headline and core are falling. The labor market remains tight, but it is slowly softening. We have the BoC on hold for the rest of the year. Upside risks in the short term remain as inflation is still high and the Fed is still hiking. Risks for the BoC to switch to the downside towards the end of the year remain as the economy decelerates,” BofA notes.

“Myriad reasons for a hawkish forward guidance at this meeting should be bullish for CAD, but price action may be mixed given US CPI release on the same day. We continue to expect CAD to strengthen against USD over the medium-term,” BofA adds. 

USDCAD Daily Chart

A breakout and retest of the long trend confirm the forming short trend. Flag formation and price action supported by a pin bar at the retest of the breakout confirm the downward movement toward the horizontal support at 1.3322. Intermediate support will be provided by the level at 38.2 fibo, the previous bottom, and 200 MA in zone 1.3395/1.3420.

FX Forecast Distribution

The distribution of banking expectations for the current quarter shows 1.34 as the equilibrium point for the cross with the move extending to 1.32

Long-term expectations support the short trend at 1.30