USD/CAD a tad weaker around 1.2720
- USD trading almost unchanged vs. CAD around 1.2720.
- Spot struggling for direction after Wednesday’s drop.
- US-CA yields spread keep acting as main drivers.
The greenback is alternating gains with losses vs. its Canadian neighbor on Thursday, taking USD/CAD to the 1.2720 area for the time being.
USD/CAD looks to US data, tax reform
The pair is navigating without a clear direction in the second half of the week and is now looking to consolidate in the lower bound of the weekly range, all after losing upside momentum in the 1.2800 neighbourhood on Tuesday.
Yield spread differentials continue to be behind the pair’s price action for the time being, particularly in the shorter end of the curve, at the same time relegating crude oil dynamics to a secondary role.
The cautious (albeit hawkish) stance from the Bank of Canada and recent comments by Governor S.Poloz alleviated expectations of further tightening by the central bank in the very near term, although market participants continue to price in the next rate hike at some point early in 2018.
On the USD-side, the third rate raise by the Federal Reserve is almost fully priced in at the December 13 meeting, although the focus of attention now gyrates around the future of the TRUMP-sponsored tax reform.
USD/CAD relevant levels
As of writing the pair is down 0.08% at 1.2717 facing the initial support at 1.2686 (21-day sma) seconded by 1.2701 (low Nov.6) and then 1.2600 (100-day sma). On the other hand, a break above 1.2788 (10-day sma) would open the door to 1.2821 (high Nov.7) and finally 1.2927 (50% Fibo of the 2017 drop).