Canadian stocks advanced on Wednesday

Index Update:  Canadian stocks advanced on Wednesday as investors dissected the monetary policy outlook of the Bank of Canada and the reasoning for keeping interest rates unchanged, contrasting it with the rate cut instituted by the U.S. Federal Reserve. After opening a little lower than yesterday's close, the benchmark S&P/TSX Composite Index remained volatile until the afternoon after which it regained momentum to settle at 31,490.85, up by 246.48 points (or 0.79%).

Macro Update:  In line with analysts' expectations, after two consecutive interest rate cuts, the Bank of Canada left rates unchanged and maintained its target for the overnight rate at 2.25% - with the Bank Rate at 2.50% and the Deposit Rate at 2.20%. This decision came as the BoC's Governing Council believes the current policy rate is at about the right level to keep inflation close to 2%t while helping the economy through a period of structural adjustment. The BoC noted that "uncertainty remains elevated" and stressed that it is prepared to respond if the economic outlook changes. Canadian economy grew by a "surprisingly strong" 2.6% in the third quarter, the Bank of Canada said. In the U.S., the Federal Reserve's FOMC cut key interest rates by 25 basis points to 3.50% to 3.75% even when inflation numbers in the U.S. remain elevated. Notably, this is the third cut of the year.

Top Movers:  Among the individual stocks, Lightspeed Commerce Inc (6.88%), Quarterhill Inc (6.52%), Shopify Inc (4.84%), G Mining Ventures Corp (6.05%), and Trisura Group Ltd (2.88%) were the prominent gainers

Our Stance:  Price action is currently consolidating near an important support zone around 31,400. Holding above this level will be crucial for maintaining positive sentiment and preserving the broader upward trend. However, a decisive break below this zone could indicate weakening momentum and potentially trigger a pullback toward 31,200 and 31,100.

Commodity Update:  The dollar weakened on Thursday after the Fed cut rates by 25 bps. It delivered an outlook that was less hawkish than expected, encouraging broader utilisation of short positions and expectations of two more cuts next year. Gold rose 0.33% to USD 4,238.45, silver gained 2.37% to USD 62.52, and copper increased 0.49% to USD 11,623.00. Brent crude added 0.40% to USD 62.48 after the U.S. seized a sanctioned tanker near Venezuela, raising supply concerns.

Technical Update:

On Wednesday, the S&P/TSX Composite Index climbed 246.48 points, or 0.79%, to close at 31,490.85. The advance was supported by healthy trading volumes, reflecting strong investor confidence and reinforcing the prevailing bullish momentum. Technically, the index continues to trade comfortably above its 21-period Simple Moving Average (SMA), which serves as a key dynamic support and confirms the strength of the short-term uptrend. Momentum indicators remain constructive, with the 14-period RSI at 62.85, signaling sustained buying pressure. Price action is currently consolidating near an important support zone around 31,400. Holding above this level will be crucial for maintaining positive sentiment and preserving the broader upward trend. However, a decisive break below this zone could indicate weakening momentum and potentially trigger a pullback toward 31,200 and 31,100.