The Canadian dollar was strong in New York trading yesterday, jumping to a 4-week high as the market received the same shock from Canada's central bank as Australia's central bank did earlier.
The Bank of Canada (BOC) raised interest rates by 25 basis points to 4.75% at yesterday's policy meeting as the market expected interest rates to be kept at 4.50%.
Having kept rates on hold at the previous two meetings, the BOC is following in the footsteps of Australia's central bank (RBA) with borrowing costs now at a 22-year high.
It seems that central banks are still focusing on lowering inflation to the target level and this situation raises the question of whether the Federal Reserve (Fed) may also do so at next week's FOMC meeting.
Examining the price chart of the USD/CAD currency pair yesterday, the price hovering around the 1.34000 level has then plunged to the level around 1.33200.
However, the target to reach 1.33000 was not reached when the price was seen rebounding towards 1.34000 and closed the New York trading session around 1.33700.
Price movement that remains below the Moving Average 50 (MA50) barrier level on the 1-hour time frame on the USD/CAD chart signals that the price will continue the bearish trend.
A further drop in price is expected to test the 1.33000 level, which was the price support zone during trading in April and May.
Next, if the price crosses the zone, the lower target that will be aimed at is 1.32000 and the price will also record the latest 9-month low.
However, if the price bounces back up, the 1.34000 level is seen to be the closest to be tested and the MA50 barrier will also try to be crossed.
The continued increase will push the price to reach the previous concentration zone which is at 1.35000 after last week's price plunge failed to save the price.
