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The Bank of Canada took interest rates to a 50 year low this morning of 1.5 percent and signaled that further monetary stimulus may be needed. Their next rate decision is on January 20th and there is a strong chance that the central bank will take interest rates down to 1 percent. According to the Bank of Canada monetary policy statement, global growth deteriorated significantly, inflation has slowed more than forecast and spending is decreasing on both the corporate and consumer level. The weakness of the Canadian dollar is helping but not enough to make the central bank feel confident that their 250bp of easing year to date will be sufficient to stabilize the economy. The BoC is telling us that more needs to done. The automobile and commodity industries in Canada has been dealt a double blow from slower growth and falling oil prices.
The Canadian dollar has sold off aggressively following the larger interest rate cut of 75bp. USD/CAD is back in the buy zone according to our Bollinger Bands and could hit 1.2875 which would open the door for a retest of 1.30. If the currency pair does not hold above 1.2670, which is the first standard deviation Bollinger band, the attempt to enter the buy zone has failed and the triple top remains in place.