The Bank of Canada (Bank of Canada, BoC) decided on Tuesday, December 5, to keep the target overnight interest rate unchanged at 1.75%, in line with expectations of financial markets and investors. The comments included in the monetary policy statement, however, caused the Canadian dollar rate to weaken significantly, testing the lowest levels against the US dollar from June this year.

The Bank of Canada has begun to appreciate interest rates at the end of 2017, raising them from 0.5% to 1.75% during the last meeting, which is the highest level in a decade. While the markets expected the December's decision not to increase, they reacted negatively to the information that the Bank of Canada sent to investors at the end of the year.

They show that the chances for a hike in January are rather small. This is suggested by fragments of "more space for non-inflationary growth" and declines in oil prices on global markets. In addition, the BoC emphasizes that in the fourth quarter the economic growth dynamics may be smaller than in the current periods of the current year, giving the market clearly to understand that for at least a few consecutive months there is no intention to raise interest rates by a further 25 basis points and will observe developments with side. Still, the bank suggests that interest rates must return to the neutral level. It does not give us what level it really is, but at least three more Canadian hikes are ahead of us.

Let's now take a look at the USD/CAD technical picture at the H4 time frame. The market has broken through the technical resistance zone between the levels of 1.3345 - 1.3382 and made a new high at the level of 1.3403. The momentum is strong and positive and it looks like there is more room to move even higher. The next target for bulls is seen around the level of 1.3465.