Canadian Dollar Strength Worries the BOC

The Bank of Canada left the interest rate unchanged at 1% as expected. In the accompanying statement, the BOC warned that while economic conditions haven’t changed materially, risks have risen, due to European debt issues and the strength of the Canadian dollar. USD/CAD rose as a first reaction but dropped afterwards.

Here’s a quote from the official statement:

However, net exports were weaker than projected and continued to exert a significant drag on growth. This underlines a previously-identified risk that a combination of disappointing productivity performance and persistent strength in the Canadian dollar could dampen the expected recovery of net exports.

The pair currently trades at 1.0025. USD/CAD continues to be a great cushion for any fall. Resistance appears at 1.0080. Above this level, a stronger US dollar will meet resistance only at 1.0270. A drop under parity will find resistance for the loonie very soon: 0.9970 and 0.9930.

For more technical levels and analysis, see the Canadian dollar forecast.

Yesterday, Canadian figures were mixed – building permits disappointed with a 6.5% fall, but the Ivey PMI came out better than expected. USD/CAD remained in range after those figures were released.

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