Talking Points:

- USD/CAD Slips to Fresh April Low Following BoC Meeting;

- NZD/USD Grinds Towards March Low (0.6890) Ahead of China GDP, New Zealand CPI.

DailyFX Table

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USD/CAD

1.3305

1.3339

1.3254

20

85

USD/CAD Daily

USD/CAD Daily Chart

Chart - Created Using Trading View

  • USD/CAD slips to a fresh monthly low of 1.3253 following the Bank of Canada (BoC) interest rate decision, with the pair at risk for a further decline as it continues to carve a series of lower highs & lows; even though the broader outlook remains tilted to the topside, the dollar-loonie may continue to give back the advance from earlier this year as it struggles to preserve the range carried over from the previous month.
  • Indeed, the BoC appears to be in no rush to lift the benchmark interest rate off of the record-low as ‘the economy still has material room to grow,’ but the central bank appears to be softening its dovish outlook for monetary policy as officials upgrade their growth forecast and expect the economy to operate at full-capacity in the first half of 2018; may see Governor Stephen Poloz and Co. continue to change their tune over the coming months as ‘employment growth has remained firm at the national level.
  • At the same time, Dallas Fed President Robert Kaplan, a 2017-voting member on the Federal Open Market Committee (FOMC), warned the central bank has the scope to unload the balance sheet later this year as he anticipated the U.S. economy to grow in excess of 2% this year, and the deviating paths for monetary policy may continue to foster a long-term bullish outlook for USD/CAD as Chair Janet Yellen and Co. appear to be on course to further normalize monetary policy over the coming months.
  • Nevertheless, the near-term outlook remains tilted to the downside amid the near-term series of lower highs & lows, but need to see a close below 1.3280 (50% retracement) to open up the next downside target around 1.3200 (61.8% retracement) followed by 1.3100 (78.6% retracement).

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZD/USD

0.6915

0.6961

0.6914

44

47

NZD/USD Daily

NZD/USD Daily Chart

Chart - Created Using Trading View

  • NZD/USD extends the decline from earlier this week as China’s Consumer Price Index (CPI) failed to meet market expectations, and the pair appears to be on course to test the March low (0.6890) as it struggles to preserve the opening weekly range; broader outlook for the kiwi-dollar exchange rate remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish formations carried over from the previous year.
  • Nevertheless, the key event risk on tap for the week ahead may sway the near-term outlook for NZD/USD as China’s 1Q Gross Domestic Product (GDP) report is anticipated to show the world’s second largest economy expanding another annualized 6.8%; at the same time, market participants may pay close attention to New Zealand’s 2Q Consumer Price Index (CPI) following the material pickup during the first three-months of 2017, and signs of heightening price pressures may push the Reserve Bank of New Zealand (RBNZ) to abandon its wait-and-see approach for monetary policy as ‘the growth outlook remains positive.’
  • However, the RBNZ may continue to tame interest-rate expectations and attempt to buy more time at the next policy meeting on May 11 as officials warn ‘numerous uncertainties remain, particularly in respect of the international outlook;’ with that said, Governor Graeme Wheeler may largely retain the verbal intervention on the local currency until his departure in September as the central bank head warns a further depreciation ‘is needed to achieve more balanced growth.
  • In turn, downside targets remain in focus for NZD/USD, with the March low (0.6890) on the radar, followed by the Fibonacci overlap around 0.6820 (23.6% retracement) to 0.6870 (50% retracement).

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--- Written by David Song, Currency Analyst

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