USDCAD - Bank of Canada rate cut hopes overdone

The Bank of Canada (BoC) will leave rates unchanged today which is unanimously expected. What's in question is whether or not the BoC drops the reference to "some modest withdrawal of the present considerable monetary stimulus may become appropriate" line. Speculation that such an action is a precursor to a rate cut has undermined the Canadian dollar in recent days, with many economists noting that disappointing growth data has spurred rate reductions in a number of countries including Australia and so Canada will follow suit.

What everyone seems to be ignoring is that the BoC governor has not reduced his rhetoric about the rising consumer debt levels and the risks that this poses to the Canadian economy. However the semantics and nuances in today's statement are interpreted, I believe that the Bank of Canada is not contemplating rate cuts and that it is happy with an overnight rate of 1 percent.

However, the short term USDCAD technicals are bullish while trading above 0.9910 with a USD uptrend supported by the break of resistance at 0.9940 bringing both the 100 and 200 day moving averages into play. A decisive break above 1.0010 should extend to 1.0240.  A move back through 0.9880 negates the upside pressure suggesting 0.9820-.09960 consolidation.