The Bank of Canada has decided to cut interest rates once again.

The Canadian dollar has strengthened continuously, nearing its peak once again, as investors continue to monitor the Bank of Canada's interest rate decision closely. The Bank of Canada decided to cut interest rates by 25 basis points (bps), which was in line with market and analyst expectations. Policymakers noted that price pressures in the real estate sector have kept inflation at a high level.

A sluggish labor market remains a key reason why analysts predict that the Bank of Canada will further cut interest rates in the next meeting. Additionally, a slowdown in production supports the case for an accelerated rate cut as exports continue to show signs of slowing down.

The Bank of Canada cut interest rates by 25 bps to 4.25% at the September meeting, marking the third consecutive 25 bps rate cut. The central bank stated that extending the period of rate cuts remains necessary due to excess supply in Canada's economy, which continues to put downward pressure on inflation.

However, policymakers expressed some concerns about inflation slowing down too much below target due to the rate hikes over the past year. Excessive slowing of inflation could result in less-than-expected growth of domestic businesses compared to past performance. Moreover, a cooling labor market contrasted with rising wages indicates increased competition in the labor market, which has led to higher costs in various areas.

The Manufacturing PMI rose to 49.5 in August from 47.8 in July, signaling the smallest contraction since the beginning of the year. Output and new orders have both slightly slowed. Additionally, companies are facing decreased demand due to heightened geopolitical uncertainty. Employment continues to decline, and companies need to manage costs more effectively.

The yield on the 10-year Canadian government bond fell below 3.05%, aligning with the decline in U.S. government bond yields. This reflects expectations that the U.S. economy will adopt a more accommodative monetary policy. Investors and analysts are eagerly awaiting the announcement of unemployment rates and non-farm payrolls this Friday, leading to forecasts that the Federal Reserve will cut interest rates by at least 25 bps in the upcoming meeting.

Techical analysis data (5H)

Resistance: 1.3504, 1.3515, 1.3524

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.3475 - 1.3484 but cannot break the support at 1.3484, you may set a TP at approximately 1.3515 and SL at around 1.3464 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.3504 - 1.3515, you may set a TP at approximately 1.3524 and SL at around 1.3475 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.3504 - 1.3515 but cannot break the resistance at 1.3475, you may set a TP at approximately 1.3504 and SL at around 1.3524 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.3475 - 1.3484, you may set a TP at approximately 1.3464 and SL at around 1.3515 or according to your acceptable risk.

Pivot point September 6, 2024 08:06 PM. GMT+7