Bank of Canada Highly Possible to Keep Hawkish: Strong CAD Lasts Until Late 2021

According to Reuters, it is still CAD that has been performing the best in the first half of 2021, with the exchange rate of CAD/USD increasing by nearly 6%. This figure is followed by that for GBP/USD featuring 3.5% growth. Compared to them, JPY continues to rank at the bottom as JPY/USD sees a decline by 5.7%. It is believed that weak JPY has constituted a trend that is conservatively expected to remain till the end of 2021. As for the duration of strong CAD, this is determined by the official statement scheduled for June 9th to the largest extent after the meeting convened by the Bank of Canada (BOC).

Based on the official statement from the interest rate decision of BOC on April 21st, 2021, the amount of bond purchases each week has been reduced to CAD 3 billion from CAD 4 billion, and fresh hints have been offered that interest-rate hikes are expected to happen some time in the second half of 2022. The hawkish message sent by BOC has boosted the strong CAD, leading the currency to a continuously outstanding performance when compared to its counterparts of other industrial powers.

Throughout the economic statistics released by Canada recently, the majority have performed satisfactorily as the Toronto Stock Exchange (TSX) hit the record high at 20043 points that have increased by 14.56% since early 2021, the growth larger than that of the NASDAQ composite index. Speaking of the boom in Canadas real estate market, the housing price index nationwide has also achieved the record high at 114.40 points. With regard to thriving oil prices, the uptrend can be testified by the price of Brent oil which has reached over USD 70.

The infectious wave of Covid-19 sweeps through Canada again, causing new cases to peak at nearly 9,000 in April whereas the number has fallen back to 2,100 recently. Given this beneficial situation, I have grounds to believe that BOC is fully supported to maintain its hawkish monetary policies even announce to tighten them for delisting on June 9th. Therefore, in my opinion, CAD can remain strong till the end of 2021.

As for technical analysis, two issues may upset investors. On one hand, is CAD overbought at present？ Based on the Relative Strength Index (RSI 14), the situation doesn‘t occur at the moment, let alone severe overbuying. On the other hand, has CAD been close to a crucial resistance level？ The figure for USD/CAD in this aspect is 1.1903 which is 100 points lower than 1.2041 at the time of writing. This level is expected to see a breakout if BOC further reduces bond purchases next week, and the next major resistance level can be met at 1.1278. JPY/CAD, a currency pair that I have been strongly promoting, has risen in the wake of breakouts in recent months and isn’t overbought currently. Speaking of the major resistance level of this pair at 91.652, I believe that the figure can witness a breakout at any time and reach 101.147 before the end of 2021.