Global macro overview for 25/05/2017:
The Bank of Canada has left interest rates on hold at 0.5% in line with consensus forecasts. In the statement released after the decision, the BoC stated that the inflationary pressures are in line with the expectations as the core inflation remains below 2.0% and wages growth remains subdued which is consistent with ongoing excess capacity. The BoC view on the economy is positive as Canada and the rest of the world is on the right track to sustain the economic rebound. The recent economic data has been encouraging: the consumer spending and housing market in Canada show robust growth and the labor market is improving as well. The current monetary stimulus is considered appropriate; however, the past measures have not had a substantial cooling effect on housing markets yet and this will be a key focus over the next few months. In conclusion, an optimistic statement with some minor clue regarding the possibility of the next monetary policy easing.
Let's now take a look at the USD/CAD technical picture at the H4 time frame. After a short-lived attempt to rally, the price was capped at the level of 1.3530 (golden channel lower boundary) and reversed towards the 61% Fibo at the level of 1.3441. This level was violated and the price tested the next technical support at the level of 1.3410 and made a low at the level of 1.3387. The trading conditions are oversold and there is a visible bullish divergence between the price and the momentum oscillator. The key resistance is seen at the level of 1.3455 and the bulls must break out above it in order to rally towards the next resistance at the level of 1.3526.
