Currently, USD/CAD is trading at 1.3323, down -0.01% on the day, having posted a daily high at 1.3327 and low at 1.3322.
USD/CAD has continued to chip away at the downside in early Asia, making a fresh aforementioned low here. After Poloz and Wilkins gave little away at last week’s FSR update,
all eyes were on today’s event and the hawkish comments that came from the BoC dep Wilkins sent the loonie to new highs and almost 150 pips against the greenback.
Senior Deputy Governor Carolyn A. Wilkins mentioned that the central bank will assess whether all the stimulus in place is still needed which was the green light to those listening out for anything different from the norm, and indeed the comments triggered a significant rally of the CAD.
“With crude soft generally and spreads still adverse, the CAD looks a bit rich still relative to our fair value model and may struggle to extend gains for the moment. Generally, however, we continue to feel that the CAD has troughed versus the USD and minor dips are a buy,” argued analysts at Scotiabank.
While there are arguments on both sides to either buy or sell the loonie here, the week ahead could well determine the fate of the dollar for the foreseeable future. The Fed is expected to hike this week, but the tone and forward outlook are what markets will likely really react to unless the Fed surprises markets and doesn’t cut. That outcome could be very negative for USD/CAD and open up the supply to really challenge late Aprils ascending support line. A dovish statement could also initiate loonie’s advance.
1.3425 was a key support area that the loonie has drifted through in recent trade. 1.3305/10 (Apr 11 low) and 1.3275 (Mar 16 & 30 low) are next support areas while on the flip side, 1.3420/70 is a key area of resistance to bring the pair back into the sideways channel and into a neutral position again.