The era of the extremely soft monetary policy of the US central bank is coming to an end. This was announced on Monday by Fed Chairman Janet Yellen, stressing that "now the Fed gives the economy the opportunity to move by inertia, measuredly."
Published on Wednesday, the minutes of the March meeting of the Fed showed that the leaders of the Central Bank are inclined to start reducing the portfolio of treasury and mortgage bonds amounting to 4.5 trillion dollars. Many economists equate the reduction in the Fed's balance sheet to a tightening of monetary policy. This process, as a rule, leads to an increase in the value of the dollar. Sales of state bonds can pull up their profitability and the dollar.
Janet Yellen confirmed yesterday that the interest rate in the US will reach about 3% within two years (currently the current range is 0.75% -1.00%).
Janet Yellen also believes that in other developed countries, economic growth and inflation are recovering and, probably, central banks will begin to wind down stimulating programs.
In this regard, it will be interesting to find out tomorrow's decision of the Bank of Canada on the interest rate, which is published at 14:00 (GMT).
The current rate in Canada is 0.5%. Canada is a net exporter of oil, and oil is the country's main export commodity. The Canadian dollar, while remaining a commodity currency, is sensitive to oil quotations. The price of oil since the end of last month adjusted for 10% after the recent fall and continues to grow amid disruptions in supplies in Canada and Libya. At the same time, the Canadian dollar, which has a correlation with oil prices of 92%, since the middle of last month, practically stands still.
If tomorrow the Bank of Canada only hinted at the possibility of an early increase in the interest rate in Canada, the Canadian dollar will strengthen sharply in the foreign exchange market, including in the pair USD / CAD.
Conversely, the expressed tendency of the Bank of Canada to continue soft monetary policy will contribute to the weakening of the Canadian dollar.
In any case, during the publication of the Bank of Canada decision on the rate, the highest volatility is expected in the Canadian dollar and USD / CAD trades.
Support and resistance levels
Since the middle of last month, the pair USD / CAD is trading, mainly in the range between support levels 1.3300 and resistance 1.3430. At the moment, the pair USD / CAD found support near the levels 1.3340 (EMA200 on the 4-hour chart), 1.3315 (the bottom line of the uplink on the 4-hour chart).
Indicators OsMA and Stochastics do not give clear signals. A lot in the dynamics of the pair USD / CAD will depend on tomorrow's decision of the Bank of Canada on the rate and accompanying comments.
If the support level breaks 1.3300, the pair USD / CAD will go to support level 1.3240 (EMA200 on the daily chart).
The reverse scenario assumes a breach of the short-term resistance level of 1.3375 (EMA200 on the 1-hour chart) and further growth in the uplink on the daily chart with targets of 1.3430, 1.3590.
Support levels: 1.3315, 1.3300, 1.3240, 1.3200, 1.3155, 1.3100, 1.3010, 1.2840, 1.2760, 1.2635
Levels of resistance: 1.3375, 1.3430, 1.3590, 1.3680
Buy Stop 1.3360. Stop-Loss 1.3320. Take-Profit 1.3375, 1.3430, 1.3590, 1.3680
Sell Stop 1.3320. Stop-Loss 1.3360. Take-Profit 1.3300, 1.3240, 1.3200, 1.3155, 1.3100, 1.3010, 1.2840, 1.2760, 1.2635