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USD/CAD pushes higher to 1.2750, daily highs

  • Spot trades in daily highs around 1.2750.
  • Weekly support emerged near 1.2680.
  • US-CA yield spreads remain the lone catalyst.

The greenback is posting moderate gains vs. its Canadian neighbor at the end of the week, taking USD/CAD to the 1.2740/50 band.

USD/CAD bounces off 1.2680

After bottoming out in the 1.2680 region on Thursday, the pair has now regained the 1.2700 handle and above and managed to clinch session tops in the 1.2740 area.

In the meantime, yield spread differentials between the US and Canadian money markets continue to dictate the sentiment around the pair, with Canadian 2-year reference testing multi-day lows in sub-1.44% levels and its US peer rebounding to the 1.75% neighbourhood.

Attention shifted as well to the BoC-Fed divergence in policies, particularly after recent comments by Chief Yellen and the dovish tone from the FOMC minutes, all pointing at the lack of traction in domestic inflation. It is worth mentioning that the probability of a move on rates by the Fed next month is above 91% according to CME Group’s FedWatch tool.

In the data space, Canadian retail sales came in below expectations on Thursday, whereas Markit will publish its preliminary figures for manufacturing and services PMIs for the current month.

USD/CAD significant levels

As of writing the pair is up 0.23% at 1.2743 and a breakout of 1.2750 (10-day sma) would open the door to 1.2838 (high Nov.21) and finally 1.2927 (50% Fibo of the 2017 drop). On the other hand, the initial support lines up at 1.2673 (low Nov.23) seconded by 1.2664 (low Nov.19) and then 1.2566 (55-day sma).

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