USD/CAD bounces off lows, retakes 1.2600 and beyond

CAD trades on a firm note vs. the buck following Wednesday’s drop.
The pair resumes the prevailing bearish trend. Support lies near 1.2520.
BoC delivered a cautious message yesterday vs. some dovishness expected.

Pablo Piovano FXStreet

The Canadian Dollar has resumed the upside vs. its American neighbour on Thursday, forcing USD/CAD to retreat to as low as the 1.2590/85 band, where buyers appear to have emerged.

USD/CAD supported near 1.2580

CAD is recovering some ground lost in response to Wednesday’s BoC-led sell off to the 1.2660 region, just below the 100-day sma, today at 1.2675.

Recall that the Bank of Canada surprised markets delivering a somewhat cautious/hawkish message at its meeting on Wednesday, where the central bank left unchanged the repo rate, as widely anticipated.

In spite of the cautious approach by the central bank, Canadian 2-year yields briefly rose to 1.92%, levels last seen in June 2011, although it has quickly returned and close below 1.89%. Furthermore, and following the bank’s statement, market participants are now projecting a rate hike in July and December.

Risks to a stronger CAD emerge from the NAFTA talks and the volatile position from President Trump, while the data-dependent stance remains unchanged.

Today’s docket showed the Canadian ADP Change rose by 42.8K, while in the US, the Philly Fed manufacturing gauge came in at 23.2 for the current month, beating estimates.

USD/CAD significant levels

As of writing the index is losing 0.19% at 1.2607 and a surpass of 1.2662 (high Apr.18) would aim for 1.2710 (high Apr.10) and finally 1.2722 (38.2% Fibo of the 2017 drop). On the flip side, the initial support comes in at 1.2525 (low Apr.17) followed by 1.2469 (23.6% Fibo of the 2017 drop) and then 1.2447 (low Feb.16).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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