Bank of Canada’s Dovish Tilt Pushes USDCAD Higher
Further to yesterday's article, the Bank of Canada kept its overnight rate at 0.25%, which was expected. The market has been pricing in a rate hike as early as March next year, and possibly even earlier, but the BoC reaffirmed its guidance that the first hike should come "in the middle quarters of 2022." This was more dovish than the market expected, and the USDCAD reacted by jumping higher on release (aqua arrow).
.png)
Past Performance: Past Performance is not an indicator of future results.
In its statement the BoC writes "the devastating floods in British Columbia and uncertainties arising from the Omicron variant could weigh on growth by compounding supply chain disruptions and reducing demand for some services." With the next statements release on 26 January 2022, the BoC will have time to assess the severity of omicron as well as the economic effects of the floods. Barring any further shocks, the central bank is likely to shift more meaningfully to a hawkish bias thereafter.
However, in the interim, the dovishness has pushed the USDCAD higher. Below we look at the currency pair's H4 chart. The EMAs are looking to cross bullishly, and the stochastic has already started moving higher (aqua ellipses). If the stochastic moves towards 80 and above (aqua arrow), it will denote that the underlying bullish momentum is growing stronger. This being the case, it is likely to be accompanied by a higher USDCAD.
.png)
Past Performance: Past Performance is not an indicator of future results.
References:
https://www.bankofcanada.ca/2021/12/fad-press-release-2021-12-08/
Featured Image by Frank Winkler from Pixabay
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.