BOC In Focus
Looking ahead, the big data focus today is the Bank of Canada July rate decision. While the market is expecting rates to remain on hold, traders are looking for the central bank to take a further step along the road to policy normalisation by announcing a further reduction in asset purchases. The base expectation is for a further $CAD1billion reduction, taking weekly purchases down to $CAD2billion.
Economic data has been improving firmly over recent months while vaccination optimism and reopening successes have helped lift sentiment also. The BOC is consequently forecasting an even stronger acceleration over the coming months, endorsed by above-forecast inflation. With this in mind, today’s meeting is likely to be firmly hawkish, sending CAD higher in the near term.
On the other hand, given the built up expectations ahead of the meeting, particularly on the back of the hawkish RBNZ meeting overnight, there is ample room for disappointment if the BOC refrains from any adjustments at this meeting.
Where to Trade The BOC Meeting?
CADJPY
CADJPY has been correcting lower within the bullish channel over recent weeks. However, RSI and MACD have been showing bullish divergence recently, suggesting scope for a break and continuation higher. A break of the bull flag formation at the 89.24 will see bulls targeting 90.69 and 91.60 thereafter.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.