The Canadian dollar is strengthening against the greenback as USD/CAD tests critical support at the 1.3800 level following the Bank of Canada’s hawkish policy decision. The central bank held its benchmark rate steady at 2.25 percent but issued warnings about mounting upside inflation risks, signaling a more aggressive stance than markets anticipated. According to Brown Brothers Harriman analyst Elias Haddad, a decisive break below 1.3800 could trigger additional Canadian dollar gains and further USD/CAD weakness in the near term.
The hawkish tone reflects growing concern among BoC policymakers about persistent inflation pressures, suggesting the pause may be temporary rather than the start of an extended hold cycle. Currency traders are repositioning accordingly, with the loonie showing increased strength across the board. The 1.3800 support level now represents a critical technical juncture for traders managing CAD exposure.
FXnCO Insight
Watch for a sustained break below 1.3800 in USD/CAD as a signal to add short positions, with the BoC’s hawkish rhetoric providing fundamental support for further Canadian dollar appreciation.
Source: FXStreet