USD/CAD turns volatile post-BOC announcement

   •  BOC raises interest rates by 25bps, as expected.
   •  Raises GDP growth targets for 2018-19.
   •  Expects inflation to remain close to 2% target.

The USD/CAD pair witnessed a wild swing of around 175-pips after the BOC raised benchmark interest rates by 25bps to 1.25%. 

The decision was on expected line and fully priced-in the markets and hence, the initial knee-jerk reaction to an intraday low, near the 1.2360 region, was quickly bought into.

Meanwhile, the accompanying policy statement revealed that the central bank expects higher rates 'over time' and foresee inflation to remain close to 2% target over the projection horizon. 

A hawkish outlook, accompanied with an upward revision of GDP growth targets for 2018 and 2019 capped any further up-move beyond the key 1.2500 psychological mark.

Traders now look forward to the post-meeting press conference, where comments by the BOC Governor and Senior Deputy Governor would influence the Canadian Dollar and provide fresh impetus.

Technical levels to watch

Sustained move beyond the 1.25 handle is likely to get extended towards 1.2545-50 supply zone en-route 100-day SMA barrier near the 1.2585-90 region.

On the flip side, weakness below 1.2425 level, leading to a subsequent break below the 1.2400 handle, might now turn the pair vulnerable to break through the 1.2360-55 support and head towards testing the 1.2300 handle.