The Canadian dollar, or loonie, rallied immediately after the Bank of Canada announced that it will consider removing stimulus to achieve their inflation target of 2.0%.
The Canadian dollar may be the last G-7 currency that is positioned for a potential rate hike. With global headwinds likely to slow down Canadian economic activity, today’s announcement surprised several analysts, as the expectation was for policy makers and their leader Governor Mark Carney to hint towards lowering borrowing costs and not raising them.
KEY LEVELS FOR CAD/JPY
Earlier this morning, price on the Canadian dollar/yen (CAD/JPY) daily chart rallied to heavily tested 61.8% Fibonacci retracement level from the March 21st to June 1st leg. The chart highlights a major bullish channel that might be ending.
If price action is unable to break above the 80.935 level, especially after no dovish comments out of Canada’s central bank and a solid retail sales number, a bearish stance maybe confirmed if we see price close below both the lower trend line of the channel and a daily close below the 200-day simple moving average.
A breakdown below the 78.00 level could target further weakness towards the 74.40 area. If the bullish channel is respected, a continuation of uptrend could be limited to the 82.70 level.
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