All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

USD/CAD Hits 11 Week High After BoC Cuts 50bp, 1.30 in Sight

Last updated 3/3/2009 9:17 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Kathy Lien

Director of Currency Research, GFT

USD/CAD hit an 11 week high following the Bank of Canada's decision to cut interest rates by 50bp to a record low of 0.5 percent. Although the half point cut was widely expected from the central bank, the Bank of Canada added salt to the wound by talking about Quantitative Easing AND further rate cuts.  If they talked about QE or further rate cuts and not both, we may not see such a strong sell-off in the Canadian dollar.  According to the BoC, more monetary stimulus may be needed and interest rates will stay low or "lower" until there are signs of growth.  They will be studying Quantitative Easing if required and will announce in April how they would implement it if they decide to do so.  This indicates that the BoC is open to taking interest rates to zero.

Dovish comments from the BoC should not be entirely surprising considering the sharp deterioration in growth and our comments in yesterday's Daily Currency Focu s.  For the first time in 3 decades, Canada has turned a trade deficit. Last quarter, growth contracted by the fastest pace since 1991 and in the month of January, a record 129k Canadians lost their jobs. Their sensitivity to the US economy makes them vulnerable to further weakness.  Unfortunately for Canada, a recovery will not come until the US economy stabilizes first. In the meantime, expect USD/CAD to make a run for 1.30.  The next BoC rate decision will be on April 21.  

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.