NZDCAD: BoC Eyes Flexible Monetary Policy Amid US Trade Uncertainty (21st March)

Key Developments

• US Tariff Uncertainty: BoC Governor Tiff Macklem warns that shifting US trade policies make economic forecasting difficult.
• Forecast Adjustments: In its 16th April monetary policy report, the BoC may present a range of economic projections instead of a single forecast.
• Policy Flexibility: The central bank will be less forward-looking and focus on minimizing risks until conditions become more apparent.
• Inflation Concerns: Tariff-driven inflationary pressures could require stronger policy responses to prevent inflation expectations from rising.
• Economic Outlook: The BoC's previous forecast projected 1.8% growth for 2025, but Macklem now signals a new financial crisis may unfold.

Impact on Financial Markets

• Canadian Dollar (CAD): Increased uncertainty could weigh on CAD, mainly if the BoC adopts a cautious stance or signals potential rate cuts.
• Interest Rates: The BoC may hold off on aggressive policy shifts but could act quickly if inflation spikes due to tariffs.
• Equities & Bonds: Market volatility may rise as investors assess the inflationary impact of tariffs and the BoC's evolving response.
• Trade & Commodities: US-Canada trade relations remain a key risk factor, potentially affecting export-driven sectors and commodity prices.

Key Takeaway for Traders

The BoC is shifting to a more reactive stance, avoiding premature policy moves while monitoring the economic fallout from US tariffs. Traders should watch for inflation data, BoC statements, and US trade developments to gauge potential market shifts.

NZDCAD – H4 Timeframe

Basic retail trading strategies often teach that the order of moving average arrangement leaves a crucial clue as to the market's direction. In the case of the 4-hour timeframe chart of NZDCAD, the 100- and 200-period moving averages are arrayed in a bullish order, with the 100-period moving average serving as support. The overlap of the moving average support and the drop-base-rally demand zone is a critical confluence in favor of the bullish sentiment.

NZDCAD – H2 Timeframe

On the 2-hour timeframe chart of NZDCAD, the moving averages still maintain the bullish array. The SBR pattern is being formed, and the trendline supports the sentiment, which is clearly bullish.

Analyst's Expectations: 

Direction: Bullish

Target- 0,83244

Invalidation- 0.81658

CONCLUSION

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