CAD/JPY trades lower close to 85.00 handle on dovish Bank of Canada

• The Bank of Canada (BoC) leaves its target rate for overnight deposits of commercial banks at 1.25% in-line with expectations.
• Dovish statement of BoC prompted CAD selling across the board, with the Bank leaving the back door open for further policy adjustment if necessary.
• The BoC press conference is coming up next at 15:15 GMT.

The CAD/JPY lost more than 55 pips in an immediate reaction as the Bank of Canada (BoC) left its target rate for overnight deals with banks unchanged at 1.25% The market saw the BoC statement as dovish and sold the CAD across the board. The CAD/JPY is now trading at around 85.14 down 0.14% on Wednesday.

Coming up next is the Bank of Canada (BoC) press conference at 15:15 GMT which is following the BoC Monetary Policy Report. 

In April the BoC provided no changes to the monetary policy and kept its key interest rate at 1.25% in-line with analyst expectations. The statement was seen as dovish which prompted CAD selling across the board. Inflation and wage growth are the key economic elements which are closely watched by the BoC which wrote: “this progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.” 

The BoC further added: “The general view on the Canadian economy is positive as the Bank of Canada sees inflation rising above 2% as transitory and the economic growth is expected to return back to robust 2% for the first half of 2018 while the economic weakness in Canada’s housing and exports are both expected to unwind in 2018.”

CAD/JPY 1-hour chart:

Immediate support is 84.80, low of the day and then the 84.00 figure. Resistance is priced in at 85.45 swing high 85.78 cyclical high.