In the face of Central Banks globally going from a hawkish shift to be back running scared into their dovish boxes one Central Bank has stood out from this and is doing what they all should be – raising rates – and that’s the Bank of Canada! The BOC hiked rates 25bps to 1% . The bank cited Canada’s stronger than expected economic performance for the hike , warranting the removal of “considerable ” stimulus in place. The bank didnt repeat the language that that the current stimulus being “appropriate.” Thats a communication to the market that they will keep hiking. The rates market has taken that on board and is pricing a 85% chance of another rate hike before year end. Parallels are already been drawn to the RBA. Is the current stimulus really appropriate? Dont think you need to be an economic genius to work out the RBA needs to hike .
The CAD was top of leader board o/n +1.2%. To get some perspective of tech levels I had to go to the monthly charts. The first interesting point to note is that price stopped exactly on long term trend line support. The 1.2160 low..post the hike.. touched and respected the 5yr up trend support. Price also briefly fell out of the monthly bolli bands.. something it hasnt done for 10yrs. Safe to say that 1.2160 is solid support and we wont be going through there in a hurry. Below that the 1.2000 psychological level looms which has also acted as a long term pivot. The 200 MMA also cuts in just above 1.2000. So bias isnt chasing the run away train at current levels as it is nearing levels which will slow it down. Better strategy is to be patient for retracement’s towards 1.2350/1.2400 to get fresh short.