The Bank of Canada has decided to maintain the interest rate at 5%.

The Canadian dollar has depreciated to around 1.345 Canadian dollars per US dollar in early February due to robust economic data from the United States. The PMI numbers for the service sector were stronger than expected, and higher inflation in January has prevented Fed Chair Jerome Powell from reducing interest rates in the near future.

Canada's government deficit increased to 4.01 billion Canadian dollars in November 2023 from 3.38 billion Canadian dollars in the same month of the previous year. This increase is primarily due to increased government spending in all sectors, mainly from modernizing programs. Public debt expenses also increased by 37.7%, mainly due to higher interest rates, while government revenue has started to increase at a slower rate.

The Bank of Canada has maintained the interest rate at 5% for four consecutive months following the meeting in January, in line with market expectations. This interest rate stability has led to borrowing costs being at their highest level in 22 years. However, the BoC remains concerned about the higher inflation rate, particularly the core inflation rate that has not yet reached the 2% target. There are expectations that the core inflation rate will decrease to the 2% target in 2025 due to the high interest rates and slowing economic activity.

Canada's economy is expected to grow by 0.3% in December 2023, with the manufacturing, real estate, rental, and leasing sectors, as well as mining and oil and gas extraction, being boosted by slowing transportation prices and reduced inventory levels. The service sector is expected to increase by 0.1%, and the manufacturing sector by 0.9%, despite being impacted by government strikes.

The CFIB Business Barometer in Canada, which reflects forward-looking 12-month expectations for small business operations in the country, increased slightly to 49 in January from 47 in December. Although the number increased from the previous month, it remains in negative territory, indicating a contractionary economic outlook and a potential decrease in future business income.

The yield on Canada's 10-year government bonds has risen by over 3.48%, following the yield on US government bonds. Additionally, Canada's PMI data in January continued to contract, putting pressure on the Bank of Canada to potentially implement easing monetary policies in the coming months. The BoC is also concerned about reducing consumer spending and a relaxed labor market due to the high interest rates.

Techical analysis data (5H)

Resistance: 1.3484, 1.3498, 1.3505

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3456 - 1.3463 but cannot break the support at 1.3463, you may set a TP at approximately 1.3498 and SL at around 7.1915 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3484 - 1.3498, you may set a TP at approximately 1.3505 and SL at around 1.3456 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3484 - 1.3498 but cannot break the resistance at 1.3484, you may set a TP at approximately 1.3456 and SL at around 1.3505 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3456 - 1.3463, you may set a TP at approximately 7.1915 and SL at around 1.3498 or according to your acceptable risk.

Pivot point February 7, 2024 05:14 PM. GMT+7