Canada may cut interest rates multiple times this year

The Canadian dollar has weakened slightly to around 1.37 CAD per USD. Although it has benefited from the weakening of the US dollar, the slowdown in labor market data and the interest rate cut at the latest meeting remain key factors leading investors and analysts to predict that the Bank of Canada will decide to cut interest rates again.

The Bank of Canada cut interest rates by 25 basis points to 4.75% at the June meeting, as the market had expected, and signaled that there might be additional rate cuts if inflation continues to slow as anticipated. The central bank set a condition that if inflation sustainably falls to the 2% target, it would ensure a less strict policy stance.

The Bank of Canada predicted that the core inflation rate, which fell below 3% in April, would result in lower inflation forecasts throughout the year. However, Canada's GDP growth in the first quarter was lower than the BoC expected, as the slowdown in labor market data led to decreased lending. Additionally, inflation may rise again due to geopolitical tensions and higher import prices resulting from the weaker Canadian dollar.

The yield on Canada's 10-year government bonds fell to 3.4%, following the decline in US yields. However, most of the pressure still stems from domestic interest rate cuts. There are further signs that the BoC might cut interest rates several more times this year, based on slowing inflation. Moreover, weaker-than-expected GDP growth could prompt the BoC to decide on rate cuts sooner.

The Canadian economy expanded by 0.4% in the first quarter of 2024, marking another increase after a decline in the previous quarter. This growth was mainly driven by increased household spending, particularly on services such as rent and transportation. Meanwhile, imports of goods and services slightly increased by 0.4%, and business investment grew by 0.8%, boosted by investments in engineering structures and the oil and gas sector.

Techical analysis data (5H)

Resistance: 1.3753, 1.3771, 1.379

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3697 - 1.3716 but cannot break the support at 1.3716, you may set a TP at approximately 1.3771 and SL at around 1.3679 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3753 - 1.3771, you may set a TP at approximately 1.379 and SL at around 1.3697 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3753 - 1.3771 but cannot break the resistance at 1.3753, you may set a TP at approximately 1.3697 and SL at around 1.379 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3697 - 1.3716, you may set a TP at approximately 1.3679 and SL at around 1.3771 or according to your acceptable risk.

Pivot point June 13, 2024 08:41 PM. GMT+7