The USD/CAD pair built on overnight strong gains and jumped to 2-1/2 week tops during the early European session on Tuesday. The US Dollar continued strengthening on the back of hawkish comments by the Fed Chair Jerome Powell and was seen as one of the key factors driving the pair higher for the second consecutive session.
Powell’s upbeat outlook for the US economy reaffirmed gradual Fed monetary policy tightening cycle through 2018 and remained supportive of the prevailing bullish sentiment around the greenback. Meanwhile, a weaker tone around crude oil prices further weighed on the commodity-linked currency – Loonie and provided an additional boost to the pair’s ongoing positive momentum. With today’s strong up-move, the pair has now added nearly 150-pips over the past 24-hours and the latest leg of a spike over the past hour or so could also be attributed to some technical buying above the 1.3215-20 support zones.
USDCAD On a Roll
Hence, a follow-through up-move, supported by persistent USD buying interest, now looks a distinct possibility. Traders now look forward to the US housing market data for fresh impetus ahead of Powell’s second round of testimony before the House Financial Services Committee as he gave an upbeat assessment of the outlook for the U.S. economy and downplayed the impact of uncertainty over U.S. trade policy on the outlook for additional rate hikes on speech in the first day.
Canadian calendar is relatively silent during today and tomorrow’s market hours and this means that the major driver for the pair moving forward would be news related to US Greenback. At this point, DXY is testing the 95.00 level which has become somewhat of a hindrance to the Dollar’s bullish theme over the past month, and this makes the prospect of top-side strategies a bit more daunting until we see some element of resolution.
Intraday bias in USD/CAD stays neutral first. Outlook is unchanged that pull back from 1.3385 should have completed at 1.3063 already. Any subsequent up-move is likely to confront resistance near the 1.3265 level, above which the pair seems all set to aim towards reclaiming the 1.3300 handle. On the flip side, the 1.3200 handle now seems to protect the immediate downside, which if broken might prompt some long-unwinding trade and accelerate the slide back towards mid-1.3100s.