After yesterday’s surprise announcement by the Bank of Canada (BOC), the USDCAD extended its downward move to below 1.34 and is nearing the 9-month long support level of 1.3225, which also coincides with the Fibonacci 38.2% level of the 2021-2022 rise. The BOC explained its decision in a statement, stating that “excess demand in the economy looks to be more persistent than anticipated.” Prior to the decision, the market had expected one or two rate hikes for the remainder of the year. However, this expectation remained unchanged in addition to yesterday’s 25 basis points hike. Both Saudi Arabia’s output cut and the BOC decision are favoring the Canadian dollar (CAD) over the US dollar (USD), causing the USDCAD to fall more than 2% over a ten-day period.

The USDCAD is now approaching the 1.3225 support level again, despite the recent surge in the dollar index. This could be an opportunity for a potential breakdown. However, there is a heavy economic calendar ahead, which could either provide an opportunity for a breakout or another rejection from the support level. Tomorrow, the Canadian jobs report is expected to show some slowdown, and next week from the US, there will be both CPI and PPI data, in addition to the FOMC decision.

If the 1.3225 support level is broken, the USDCAD might target the midpoint of the 2021-2022 rise, which is also very close to the uptrend line starting from 2021. On the other hand, if it is rejected from the key support level yet again, with the help of low RSI, incoming data, and the FOMC decision, the price might target 1.37 in the coming weeks.