Open an Account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open an Account
✖

BOC Preview: How much will the BOC hike?

April 11, 2022 3:03 PM

The Bank of Canada meets on Wednesday to decide how much it should raise interest rates.  When the central bank last met on March 2nd, it hiked interest rates by 25bps to 0.5%. This was the first time the BOC hiked rates since October 2018.  At the time, the BOC also decided to maintain the current size of its balance sheet by reinvesting the proceeds of its government bonds until it deemed appropriate.  Since then, Canada released its February CPI data. The print was 5.7% YoY vs 5.5% YoY expected and 5.1% YoY last.  In addition, Canada also released its February and March Employment Change.  The results were +336,600 and +72,500, respectively.  With strong inflation and strong employment data, the BOC is sure to begin tapering its bond holdings.  The only question for the central bank is “How much should they hike?”.  Most are expected a hike of 50bps; however, some are hoping that it may hike as much as 75bps!

USD/CAD has been trading in a range since November 10th between 1.2454 and 1.2900.  However, on April 5th, the pair tested the bottom of the range and failed, leaving a hammer candlestick on the daily timeframe.  Hammers are reversal signals.  The pair hasn’t looked back since and has formed a bullish engulfing candle today!  In addition, USD/CAD traded above horizontal resistance, and upward sloping trendline dating to June 1st, 2021, and the 200 Day Moving Average, near 1.2620.

Source: Tradingview, Stone X

On a 240-minute timeframe, USD/CAD has retraced to the 50% level from the highs of March 15th to the lows of April 5th. First resistance is 50 Day Moving Average at 1.2660 (see daily), then the 61.8% Fibonacci retracement level from the March 15th high to the April 5th lows near 1.2692.  Above there, price can trade to horizontal resistance at 1.2781.  However, notice the RSI has moved into overbought territory, an indication price may be ready for a pullback.  First support below the 200-Day Moving Average is horizontal support at 1.2540.  Below there, price can drop to the April 5th lows near 1.2402.

Source: Tradingview, Stone X

Notice as well that USD/CAD and WTI Crude Oil have become highly negatively correlated once again with a correlation coefficient of -0.83.  Any reading below -0.80 is considered a strong, negative correlation. (With Crude being so volatile over the last month, the correlation had fallen out of favor).  Therefore, if one is looking for direction for USD/CAD, WTI Crude Oil may offer some help.

The Bank of Canada meets on Wednesday and is expected to hike interest rates.  In addition, it is expected to begin to unwind its balance sheet.  However, the markets will be waiting to see if the BOC hikes by 50bps or by 75bps.


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2025