USD/CAD plummets below 1.28 on Poloz's hawkish comments

The USD/CAD pair came under a heavy selling pressure in the US afternoon after Stephen S. Poloz, the Governor of the Bank of Canada, delivered some hawkish comments on the policy outlook. The pair quickly dropped from 1.2860 to 1.2780 with the initial market reaction and was trading at 1.2790 as of writing, down 0.21% on the day.

Speaking before the Canadian Club Toronto,  Poloz said that Canadian economy had made tremendous progress over the last year and was running close to its full potential. Although the current policy setting clearly remained quite stimulative,  the economy would need less monetary stimulus over time, Poloz further added. Boosted by these comments, the loonie gained strength against its peers.

Meanwhile, recovering crude oil prices helped the commodity-sensitive CAD buy find more buyers in the session.  After dropping toward the $56 mark the barrel of West Texas Intermediate reversed course and was last seen trading near $57, where it was up 0.5% on the day.

On the other hand, following its FOMC-inspired sharp fall, the US Dollar Index gained traction on the back of upbeat macroeconomic data releases from the United States. However, it struggled to preserve its bullish momentum and failed to retake the 94 mark. As of writing, the DXY was up 0.2% at 93.60.

Technical levels to consider

The immediate support for the pair aligns at 1.2755 (50-DMA) ahead of 1.2700 (psychological level) and 1.2620 (Dec. 5 low). On the upside, resistances could be seen at 1.2800 (psychological level), 1.2850 (200-DMA) and 1.2915 (Oct. 31 high). The RSI indicator on the daily graph recently eased below the 50 handle, suggesting that sellers are taking over the control of the price action.