The New York session on Wednesday focused on the Canadian central bank meeting as investors gauged expectations for policy tightening to be slowed following the Australian central bank meeting which was first in the spotlight on Tuesday.
The Bank of Canada (BOC) surprised the market by raising interest rates by 50 basis points for its final meeting of the year as the market expected slower rate hikes.
The interest rate has increased from 3.75% to 4.25%.
The central bank is hawkish when considering the tightening of monetary policy that needs to be continued further to lower inflation which is still high.
This is based on Canada's encouraging economic growth in the third quarter in addition to strong commodity exports.
Therefore, the strengthening effect on the value of the Canadian dollar currency can be observed in the New York session yesterday.
On the price chart of the USD/CAD currency pair yesterday, prices initially showed gains in the European session continuing the pattern of the previous day.
After reaching the height of 1.37000, the price started to show a decline and was also influenced by the results of the BOC meeting.
A decline of 100 pips was displayed before the price bounced back after testing the 1.36000 level.
The price is also seen to be unsuccessful in falling below the support level of the Moving Average 50 (MA50) on the 1-hour time frame, indicating that the price movement is still in a bullish trend.
The slow rising pattern was exhibited again to resume trading in the Asian session today (Thursday) but has not overcome the height reached yesterday.
If the rise continues, the price has the potential to go up to around 1.38000 and record the latest 5-week high.
However, if the price pulls back down again, after crossing the MA50 support level, expect the price to drop to the 1.35000 zone.
If the zone is also broken, the price can reach back to the previous focus support level at 1.34000.
