The Bank of Canada is likely to maintain its accommodative monetary policy.

The Canadian dollar has weakened rapidly as the U.S. tariff threats have directly impacted demand outlook from the U.S., potentially slowing down U.S. imports. President Trump has confirmed plans to impose a 25% tariff on Canadian goods and a 10% export tax on Canadian energy by March. This uncertainty has prompted the Bank of Canada to adopt a more dovish stance. The bank has reduced its interest rate from 5% to nearly 3% in response to inflation remaining below target, reinforcing market expectations that the Bank of Canada is prepared to adjust its policy to support domestic growth.

Canada’s inflation rate increased slightly to 1.9% year-on-year in January, up from 1.8% in the previous month, aligning with market expectations. Although inflation has edged higher, it remains below the Bank of Canada's 2% target for the sixth consecutive month. As a result, investors anticipate that the central bank will continue its accommodative monetary policy. Breaking down the inflation data, prices in the transportation sector surged due to higher oil and natural gas prices, which drove gasoline costs up by 8.6%.

Canada’s industrial producer price index rose by 1.6% in January, marking a rebound after contracting in December. This increase was primarily driven by a more than 7% rise in energy prices, particularly diesel, which surged 9.4% and is widely used across multiple industries. As a result, overall production costs have climbed. Additionally, in the food industry, price pressures have intensified, with prices of fruits, vegetables, animal feed, and other food products rising by 2.1% year-on-year in January. The producer price index has now surged 5.8%, reaching its highest level in 12 months.

Retail sales in Canada declined by 0.4% month-on-month in January 2025, marking the first drop in seven months. Sales rose in nine out of eleven subsectors, led by the food and beverage sector, which grew by 3.5%, and the retail goods sector, which increased by 3.2%. Although overall retail sales continue to trend upward, growth remains below the long-term average. However, on a year-on-year basis, retail sales increased by 2.4%, reaching the highest level in two years.

Foreign investment in Canadian financial assets rose by 14.4 billion CAD in December 2024, up from 13.8 billion CAD in the previous month. This marks the 10th consecutive month of net investment in domestic markets, with the majority of foreign investors focusing on debt securities, particularly government bonds. Meanwhile, Canadian investors purchased 3.8 billion CAD worth of foreign assets in December, rebounding from a net investment of 17.6 billion CAD in the previous month.

Techical analysis data (5H)

Resistance: 1.4457, 1.4487, 1.4539

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.4323 - 1.4375 but cannot break the support at 1.4375, you may set a TP at approximately 1.4487 and SL at around 1.4293 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.4457 - 1.4487, you may set a TP at approximately 1.4539 and SL at around 1.4323 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.4457 - 1.4487 but cannot break the resistance at 1.4457, you may set a TP at approximately 1.4323 and SL at around 1.4539 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.4323 - 1.4375, you may set a TP at approximately 1.4293 and SL at around 1.4487 or according to your acceptable risk.

Pivot point February 27, 2025 09:10 PM. GMT+7